U.S. commercial paper shrank for the week by $20 billion
Editor’s Note: This is an important statistic to watch, if the U.S. economy is really seeing recovery, we should see steady increases in the commercial paper market. That would show that businesses are needing more short-term funding for operation like increasing production and payroll and that would show up in increases of issuance of commercial paper. It is important to watch the “plumbing” of our financial markets to see if the media and analysts are in-line with what is actually happening in the capital markets which drive growth.
Reuters - The U.S. commercial paper market contracted for the first week since early February, suggesting a lingering impact from the global credit crisis, Federal Reserve data showed on Thursday.
For the week ended March 3, the size of the U.S. commercial paper market, a vital source of short-term funding for companies’ day-to-day operations, fell by $20.4 billion to $1.134 trillion outstanding, from $1.154 trillion outstanding the previous week.
Piper Jaffray starts $300 million dollar commercial paper program
Piper Jaffray Companies plans to start a $300 million commercial paper program, the investment bank said in a regulatory filing on Wednesday.The program will in part fund Piper Jaffray’s securities portfolio and provide general working capital, the filing said.
Piper Jaffray, which caters to small and mid-size business customers, is recovering from five consecutive quarters of quarterly losses, beginning in the first quarter 2008 through first quarter 2009.
Capmark Financial preparing for bankruptcy soon
Editor’s Note: After reading the tone of this press release, it comes to my attention that this bankruptcy might of been part of the plan so they could reorganize the debt and later down the line become profitable because the debt was at a much more manageable level. It would be hard to believe with the U.S. residential home market deteriorating that they could of not seen the commercial real estate market following suit. It will be very interesting to see how this plays out down the road.
Reuters, New York - Capmark Financial Group Inc., the commercial real estate company created through a 2006 leveraged buyout of certain GMAC assets, is preparing to file for bankruptcy possibly by the end of next week, according to a source with direct knowledge of the situation.
U.S. Commercial Paper Market Up $19.7 Billion This Week But Still Down 50% From Peak
Editor’s Note: This is promising data showing investor’s appetite for corporate debt and signs that companies are preparing for a recovery. Job numbers can out today and surprised the analysts by raising the unemployment rate to 9.8%. Interesting that the market is still down by about 50% to $1.08 trillion from the peak at $2.2 trillion dollars in the summer of 2007. It mentioned that the commercial paper market has been shrinking because these companies have found cheaper sources of funding, where is a cheaper source of funding? Maybe, direct from the Federal Reserve?
Dow Jones, New York - The U.S. commercial paper market increased for the seventh consecutive week this week, according to data released Thursday by the Federal Reserve.
Obama’s financial regulation bill requires more hedge fund transparency
Editor’s Note: It looks like they are setting the minimum amount to start the extra reglatory filings at any hedge funds with atleast $30 million dollars of assets. We will need to monitor this closely to see what types of effects it will have on the hedge fund industry. I do like the required for reporting off-balance sheet transactions, I see no reason for those except to hide risk and liability from the public. As a follow-up point, if you make the arguement that the off-balance sheet transaction is adding value then why not have it on the balance-sheet?
News (Reuters):
The Obama administration on Wednesday will send Congress legislation demanding that hedge fund managers submit to new registration and disclosure rules to boost transparency and limit any risks they pose to the financial system, a senior U.S. Treasury official said.
U.S. drafting rules to spur private equity funded bank buyouts
Editor’s Note: This is a positive move for the financial markets as a whole. The more we get these failed banks out of the system or into new ownership, the more trust will return to our financial system. The last thing we need in America is “Zombie Banks” or a “Lost Decade” like they had in Japan in the 1990’s. We need to punish the bad actors in this latest crisis and that equals to either bankruptcy or a takeover. This is the correct prescription for our market-based economy.
News (Reuters):
U.S. regulators are drawing up rules that would make it easier for private equity firms to acquire troubled banks, aiming to free up more funds to recapitalize lenders, the Financial Times reported, citing people close to the situation.
Credit Default Swap growth may increase corporate bankruptcy risk
Editor’s Note: It is true that with this form of corporate debt insurance, bondholders do actually have less of a reason to not want to restructure a corporation’s debt and might actually like to see them fail so they can recoup losses from the counter-party that took this risk from them.
Personally, I am on the fence if this is productive or counter-productive? Either way, in a market system their are winners and losers and that is what brings balance to our system. If we did not have this type of debt insurance, we might have less participation in the bond markets or more due diligence when making these types of investments. I am not sure if there is anything wrong with that so at this moment I would just say they do need to be regulated and standardized so we know what types of risks our companies are taking on.
News (Reuters):
Companies at risk of failure may be more likely to succumb to bankruptcy than in previous downturns because bondholders who also own credit default swap protection could be less amenable to debt restructurings, Moody’s Investors Service said on Monday.