• Home/
• Fixed Income

David Fuller and Eoin Treacy's Comment of the Day
Category - Fixed Income

WeWork agrees to $9 billion SPAC deal in new path to go public

This article from Fortune may be of interest to subscribers. Here is a section:

The company disclosed to prospective investors it had lost about $3.2 billion last year, the Financial Times reported earlier this week. The documents also show that occupancy rates fell to 47% at the end of 2020, down from 72% at the start of the year, before the pandemic hit, according to the newspaper.

In the interview in January, Claure argued the pandemic was helping WeWork. He said the work-from-home situation benefits the company and would continue to do so as people return to the workplace. “This is where WeWork suddenly becomes an incredible value proposition,” he said. “New habits have been developed during this pandemic.”

Mathrani will continue to lead the company after the deal. Vivek Ranadive of BowX and Insight Partners’s Deven Parekh will join the board.

BowX Acquisition Corp. is managed by Ranadive and Murray Rode, both former executives at TIBCO Software and co-founders of venture firm Bow Capital.



Read entire article

Message Received, Loud & Clear

This report from CIBC may be of interest to subscribers. Here is a section:

The Bank of Canada is seeing enough progress in the economy that it feels it can begin reducing outdated programs, as well as slowly begin to remove some of the considerable stimulus in the system. There should not be too much impact from the cessation of select market functioning facilities directly. The bigger news today is the strongest signal yet that the Bank is ready to conduct a taper, and begin ‘right sizing’ the QE program. This is also the first time we have been shown what the future sequencing looks like, which is: i) taper to a net-zero purchase profile; ii) enter a reinvestment phase, and; iii) normalize rates. The best trades to take advantage of this are micro in nature, though also put ‘bigger’ macro trades like receiving 2yr-to-4yr forwards versus the U.S. at risk.



Read entire article

Oaktree Client Memo

Thanks to a subscriber for this note by Howard Marks. Here is a section:

So today’s high asset prices may be justified at today’s interest rates, but that’s clearly a source of vulnerability if rates were to rise. (Note that today’s 1.40% yield on the 10-0year Treasury note is up from -.52% at he low in august 2020 and from 0.93% in just the last seven weeks)

The Fed says rates will be low for years to come, but are there limitations on its ability to make that happen? Can the Fed keep rates artificially low forever? On longer-maturity bonds? And what about inflation? Can the 10-year Treasury note still yield 1.40% if inflation reaches 3%? Will people buy it a negative real yield? Or will the price fall so that it yields more? Where could inflation come from? The price of goods may not rise in dollar terms, but reduced respect for the dollar (or increased quantities of dollars in circulation) could cause it to depreciate relative to the price of goods: same result.



Read entire article

BlackRock, Lombard Say Faster Inflation Calls Are Premature

This article may be of interest to subscribers. Here is a section:

“As the dust settles in the wake of today’s FOMC, we will be focusing upon whether any additional back-up in yields is accompanied by a further widening of breakevens,” said Richard McGuire, the head of rates strategy at Rabobank. “If so then this argues that the move higher in rates is sustainable.”

But as long as U.S. yields don’t rise in a chaotic fashion, risk assets including emerging-market and high-yield corporate debt are expected to outperform, according to BlackRock’s Seth. “Rates can drift higher and still remain a positive backdrop for the risk assets, as long as the vulnerability is under control,” he said.

A Bloomberg Barclays index on global credit returns has gained 11% over the past year, compared with a loss of 2% for a gauge tracking Treasuries. BlackRock switched to a neutral duration position in February from underweight. The fund likes notes sold by Chinese real estate companies and the nation’s onshore bonds.

“The lack of correlation with the rest of the global developed markets also provides a diversification benefit,” Seth said of Chinese debt.



Read entire article

Lennar Shares Spike on Plan to Spin Off Startup Investments

This article from Bloomberg may be of interest to subscribers. Here it is in full:

Lennar Corp. soared after the homebuilder said it will create a spinoff with at least $3 billion in assets.

The new company, which will have $3 to $5 billion in assets and no debt, will include Lennar’s technology investments, according to an earnings call Wednesday.

Lennar, which said it made about $470 million on its investment in Opendoor Technologies Inc., jumped as much as 9.5% to $97.09 in New York. The stock had gained 16% this year through Tuesday’s close.

Miami-based Lennar reported orders on Tuesday that beat estimates as it benefited from the pandemic housing market. It got also a boost from Opendoor, which began trading in December.

Lennar said two other “technology-driven” companies it has invested in also have announced agreements to go public through mergers with special purpose acquisition corporations, or SPACs.

Those companies are Doma, formerly known as States Title, and Hippo, the home-insurance startup that’s merging with a blank-check company led by Zynga Inc. founder Mark Pincus and LinkedIn co-founder Reid Hoffman



Read entire article

Yields, ETF Buying BOJ Set to Add Flexibility

This article by Yuki Masujima for Bloomberg may be of interest to subscribers. Here is a section:

The basic elements of yield-curve control will probably remain unchanged, with the short-term rate anchored at -0.1% and the BOJ aiming to keep the 10-year JGB yield around 0% -- while allowing fluctuations depending on economic and price developments.

We expect Kuroda to renew the commitment to the 10-year yield range of +/-0.2 ppt around 0%, but -- importantly -- also indicate that temporary moves beyond the range would be acceptable, as long as the effects of monetary easing aren’t disrupted and the yield curve is consistent with economic activity, prices, and financial conditions.

In operational terms, this may mean the BOJ will conduct its JGB purchases with more flexibility -- changing the frequency of the operations and the menu of its purchases, depending on market conditions.

This would help improve the functioning of the Japanese government bond market in terms of price discovery and liquidity -- increasing policy sustainability.



Read entire article

Treasury Yields Surge to Test Key Level in Sudden Selling Bout

This article from  Bloomberg may be of interest to subscribers. Here is a section:

The move started in Australia, where bond futures fell heading into the market’s close to put modest pressure on Treasuries. At around the same time, there was a block sale of 10-year ultra bond futures, followed by a buyer of downside put options -- the hedging of which tends to weigh on the market. The three combined to tip 10-year Treasury futures through Thursday’s session low, which unleashed the wave of selling.

As many as 20,000 contracts changed hands in the next five minutes, the largest activity of the day. The speed and severity of the move left many traders perplexed, with volumes in the cash market comparatively modest.

The moves there were most pronounced in the benchmark 10-year tenor, with the yield curve steepening as two-year rates only rose as much as two basis points. European bonds followed Treasuries, with U.K. 10-year yields up five basis points to 0.79%.



Read entire article

Remit For The Monetary Policy Committee (MPC)

This letter and response between the UK’s Chancellor of the Exchequer and the Governor of the Bank of England may be of interest to subscribers. 

To achieve this objective, the government’s economic strategy consists of:

• operationally independent monetary policy, responsible for maintaining price stability and supporting the economy;
• a credible fiscal policy, maintaining sustainable public finances, while providing the flexibility to support the economy;
• structural reform to level up opportunity in all parts of the UK and to transition to an environmentally sustainable and resilient net zero economy, including through regulation, and an ambitious programme of investment in skills, infrastructure and innovation, in order to sustain high employment, raise productivity and improve living standards;
• maintaining a resilient, effectively regulated and competitive financial system that supports the real economy through the provision of productive finance and critical financial services, while protecting consumers, safeguarding taxpayer interests and supporting the transition to a net zero economy. 6

ACCOUNTABILITY
The Monetary Policy Committee is accountable to the government for the remit set out in this letter. The Committee’s performance and procedures will be reviewed by the Bank of England’s Court on an ongoing basis (with particular regard to ensuring the Bank is collecting proper regional and sectoral information). The Bank will be accountable to Parliament through regular reports and evidence given to the Treasury Committee. Finally, through the publication of the minutes of the Monetary Policy Committee meetings and the Monetary Policy Report, the Bank will be accountable to the public at large.   



Read entire article

'Reddit Raider' Favorite GameStop Soars After Latest Cohen Push

This article by Bailey Lipschultz for Bloomberg may be of interest to subscribers. Here is a section:

Monday’s rally came despite short interest being near the lowest level in at least a year. Roughly one-quarter of shares available for trading are currently sold short, according to data compiled by S3 Partners. That compares to a peak of more than 140% in January.

“Shorts will continue to be squeezed out of their positions as GameStop’s stock price continues to trend upwards,” said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.

Shorts sellers are down nearly $6 billion in year-to-date mark-to-market losses, including $609 million in Monday’s trading alone, Dusaniwsky said by email.



Read entire article

Email of the day - on gold ETF holdings

On gold, I notice there is now significant weakness in the chart for Total known holdings of gold ETF. Will we need to see this stabilize and turn up before any rise is likely in spot gold prices?



Read entire article