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Daily Market Commentary

There is a lot of junk debt flying around the street these days.  With the big banks having written down the value of these assets on their books, many are now looking to unload these LBO bonds.  Mostly created during the private equity mania of 2004-2007, the banks who financed the deals wound up long a lot of paper that they would like to sell to free up capital.  The most interesting part about this is that they are tapping on the doors of the PE firms that were instrumental in creating so much of the debt in the first place.  They are even offering financing to the likes of Apollo Management, Blackstone, and TPG as well as steep discounts on the paper in an effort to unload it.  It sounds a lot like the subprime debt situation, where the banks were caught with lots of paper as they were trying to unload it to hedge funds.

 

 The Federal Reserve is once again all over the news tickers this morning, as Bernanke claims the Fed is ready and willing increase the cash they are making available to the market in the form of repos and term auctions.  The Fed has done a lot to keep the liquidity in the markets, and they are indicating that they are willing to do much more.

 

 Changes will be coming to LIBOR shortly.  The British Bankers Association is analyzing the benchmark rate on which TRILLIONS of dollars of derivatives are priced, and planning on revamping how the rate is calculated as suspicion has been aroused that banks are understating their borrowing costs.

 



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