Tuesday, December 9, 2008

A Little Bit of a Rehash

I apologize for going over some of the same material, but there were some interesting updates today:

The above graph tracks the issuance of corporate debt by financial institutions as part of the TLGP. SunTrust joined the party today, issuing $2.75 billion of 3 year bonds. This brings the industry total to $49.475 billion. KeyCorp plans to issue as well, it looks like $500 million - $1 billion of 3 year bonds. I take issue with this because we STILL have no price discovery. The FDIC guarantee is the major reason these bond sales are taking place, I get it. However, by not allowing the market to price the companies as stand alone entities, we have no idea how far along these companies are in the recovery process. Without market discipline, these companies are not motivated to continue their purging of bad assets and reorganizing.

The above table tracks the amount on money the Treasury Department has invested (TARP) in financial companies and their corresponding market capitalization. SunTrust was active is this space today as well, announcing that they will seek an additional investment of $1.4 billion (the total in the table includes this amount). In addition, they are continuing with the liquidation of their stake in Coca-Cola.

The above graph charts a little bit of history that was witnessed today. The top part of the graph charts the 90 day Treasury Bill rate (white line) and the 90 day commercial paper rate (orange line). The 90 day T-bill rate hit 0% today, an unprecedented event. It is an example of how risk averse institutions have become. In fact, shorter term T-Bills traded today with a NEGATIVE yield. Yep, buyers paid to lend money to the Federal Government.

Commercial paper is a short term debt instrument that corporations typically use to finance payrolls and other short term cashflow deficiencies. The bottom part of the graph tracks the difference in yield that corporations have to pay over T-Bills in order to run their businesses.

1 comment:

Jason said...

Congress has chosen members of an oversight committee specifically for the Troubled Asset Relief Program. The oversight committee members which lacks the ability to have proper oversight Which is defined as an oversight committee they should be looking for an omission or error due to carelessness, unintentional failure to notice or consider; lack of proper attention and supervision; watchful care. Supervision is a process that allows it to oversee a process during execution or performance; superintend needs to be replaced without regard to political affiliation.