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The Times' Rorshach Geithner Story
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Sinking Animal Spirits
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Be Your Own Counterfeiter
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Being Tim Geithner
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Notes From a Press Conference Naif
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What Good is the News?
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Stressful Enough
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Not Regretting the Pound
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Introducing the New Ford Squeeze
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Non-Economic Questions of the Day
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The Stress Test Blind Alley
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Happy Hour
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Recovery Without Rebalancing
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The Shape of Your Recession
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Credit Market Datapoint of the Day
Serena Ng says that Bear Stearns paid "a heavy price" when it issued $2.25 billion of five-year bonds at 245bp over Treasuries on Monday. She doesn't actually do the math, so I'll do it for you: the typical single-A corporate bond yields 125bp over, so let's say that Bear Stearns was forced to pay a premium of 120bp. On $2.25 billion of bonds, that works out to $27 million per year, or an extra $135 million in total. Which, weirdly enough, is more or less the same amount of money that Jimmy Cayne was planning on paying Warren Spector over that time.
More interesting to me is the fact that the new bonds priced 50bp wide to Bear's existing 2012 debt. That's a big spread, and that's the datapoint which really encapsulates the severity of the present credit crunch. If the market was remotely efficient, the two 2012 bonds would trade pretty much on top of each other. But when a bond window shuts, it shuts, and a would-be issuer is forced to pay through the nose if investors are going to be enticed to spend their money in the primary rather than the secondary market. Which I'm sure made for some difficult conversations between Bear's syndicate desk and its buy-side clients.
