Intended Unintended Consequence

A funny thing happened on the way to the Congressional-Federal Reserve centrally planned economy, corporations (globally) have been able to put themselves in incredible medium/long term financial benefit. The Treasury market continues to garner the majority of attention but does not tell the story. Q1 2012 saw a near record in issuance. 1.15T in sales rivaled only Q1 2009 in size (more on that in a bit). HG saw 274.5B and HY took in 88B, both new records. Buyers have thrown an additional 15.8B into IG and 14.7B into HY - net-according to Lipper.

The issues were global even as Europe faltered significantly. Daimler, Fiat and Glencore all came to market. Petro Brasil and SABMiller both made significant borrowing placements. Heinz and the Univ of Penn joined in the fun with the University going 100 years out as its most vocal MBA professor cheer led for Dow 14,000. Corporate treasures' and CFOs are not universally ignorant. Given the cash portion of balance sheets, the benefits bolster near term shocks and longer term possible positive outcomes.

Now to the Q1 2009 benchmark. An historic sell off in Treasuries took place as EOTW fears morphed to "exit strategy" pipe dreams 3 years ago. The decline commenced in Jan and continued into June. The 10 year future lost 14 points and the Bond Classic a 70's like 27 handles. The adjustment in March is a rounding error by comparison. If Livermore worked in the Finance Dept. at SABMiller he might be overheard saying, "It's amazing the good prices you can get in a bear market."

One thought on “Intended Unintended Consequence

  1. lwmaus

    Unintended consequences (UC), no. Bubble(s), probably. People and public/private entities scramble for ‘real’ returns.

    The real UC will show their pointy heads sometime in the near future I fear. Shadows of their coming flit about in the data as we speak.

    In the meantime, its ‘partay time’ and the CB is alive and well.


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