Re: credit recap

(an interoffice email)

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> Mkt did not like the Fed move today- IG9 went from 70 out to 78.75 after the
> news. CMBS cash (which had a roaring spread tightening in the morning of
> about 15bp) gave all but 6bp of it back. There was a rumor this AM that
> JPM is taking a look at Wamu, but nothing official materialized yet.

Thanks, watching to see if the tightening resumes after this afternoon’s ‘reduction of risk’ reaction to the fed report.

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> General Credit News
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> The US Federal Reserve cut the Fed Funds Rate by ¼ point and the discount
> rate by ¼ point. The market sold off due to discount rate cut being less
> than expected (people expecting a ¾ point cut). Also, the fact the Fed
> maintained concerns about inflation worried people.

Yes, the media had convinced everyone they didn’t and shouldn’t care about inflation.

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> The CEO of the Dubai owned investment firm Istithmar PJSC said that US
> financial and real estate companies are at “attractive valuations” after
> their shares fell on the subprime mortgage crisis. The CEO said, “We feel
> there’s been an overreaction and the market has not yet separated the wheat
> from the chaff.”

Agreed!

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> German investor confidence dropped more than economist forecast in December,
> reaching their lowest level in almost 15 years as rising credit costs dimmed
> the outlook for economic growth.

They must be watching CNBC, too!

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> Homebuilder shares fell the most ever on speculation that the Fed’s interest
> rate cut may not be enough to increase demand for new homes or prevent a
> recession. S&P’s measure of 15 homebuilders dropped 9.7% today after the
> Fed cut rates by ¼ point.

Overreaction is my best guess.

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> Citigroup Inc. (C): Board appointed Vikram Pandit CEO.
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> Fannie Mae (FNM): CEO said the US mortgage and housing markets are unlikely
> to recover until at least 2010.

May not go through old highs until then, but should be bottoming somewhere around current levels of activity.


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