What does everyone think of all the failed auctions and the ensuing Fail rates that are triggered. Will buyers come back to get the yields, wil the issuers call the bonds, will some be unable to pay…Gov now wants to investigate the market? What is the next step?
Just my personal opinion, as I have no inside info on this and most of my job is selling, not analyzing investments, but I think bond funds might be the beneficiaries of all this turmoil. If the fund has the ready cash and expertise to decipher all this chaos, they stand to mop-up.
Closed end funds with leverage will get beat up (they already have, but possibly more to come). Nobody really knows the effects because its all still being sorted out.I think you'll see the big investment banks like Citi, UBS, etc come in and make a secondary market in these things to provide liquidity. Investors who need liquidity and cant wait it out, will end up taking 90 cents on the dollar or something like that, and the banks will have a new profit center. JMHO
The reason that failed auctions are so rare(until recently) is that in the past the primary dealers(such as UBS and Goldman) step up and buy remaining supply as a ‘bidder of last resort’. In these recent auctions, there are far more sellers than buyers, and the dealers are unwilling (or unable due to lack of capital) to step up…because they already have so much other junk on their books from the CDO blowups.
Exactly…the reason for the issue is Goldman, UBS, Merrill etc have all stepped out of the market causing the liquidity issue. But I have to say getting paid 7-14% on AAA paper isn’t a bad situation but it does suck if you need liquidity. We contiuned to make a market for a few days after the others stepped out, but had to stop because we couldn’t afford to own all teh paper on the street lol.
Why wouldn’t the muni issuers just default on the new 10-15-20% reset rates? Also, I have to believe it’s going to take awhile to find new financing for all of these issuers. I think their best bet is to turn them into variable rate notes instead of auction rate notes.
My concern is for the closed-end APS market. Failure reset rates are not that high. What’s the impetus for the issuer to clean this up?
No other thoughts, or does everyone simply tie up all their clients in low paying bank deposits
if the firms didn’t change to low paying bank deposits, no one would be in them…
[quote=frumhere]if the firms didn’t change to low paying bank deposits, no one would be in them…[/quote]
Bank Deposit, Money Market…doesnt really matter both pay far less than MARS