Bonds Today: Reminiscences of Things Past, Or Groundhog Day?

A friend of the blog passed along to me a note that the Treasury had called the 13 1/4 May 2014 bond. Obviously, with that coupon the taxpayers will benefit greatly from the call and subsequent refinancing.

I post this because I recall that bond as the last bond to trade at 14 percent. It was issued as a 30 year bond in May 1984. In those days the treasury issued callable long bonds but the call protection was 25 years. Anyway, on the settlement day May 15 1984 the owners threw up all over their shoes and the futures market was down limit. The new bond traded to 14 percent in the cash market. The rest is history as its successor sees nothing but buyers today in the 2.80s.

Groundhog Day was a great movie with Bill Murray and a woman who is ubiquitous in some cosmetic commercial and it spoke of the transformative power of love. There is no love in the bond market or stock market for financial names, and the rout in financial paper is leading stocks lower.

And in the spirit of the aforementioned groundhog day, the price action in corporate bonds is mimicking that which transpired yesterday. Industrial names, especially quality names, are generally unchanged or if weaker, modestly so.

Financial paper is taking a shellacking once again. Bank of America (BAC), which in a sudden epiphany realized it needed TARP money, has seen its spreads widen 30 basis points to 40 basis points. Citi (C) paper, which widened dramatically yesterday, is out another 15 basis points. JPMorgan (JPM) paper is wider by 5 basis points to 10 basis points.

Telecom paper is well bid and 10 year Verizon (VZ) and AT&T (T) paper has leaked wider by about 10 basis points over the past week.

The IG 11 is unchanged at 218/220.

Wal-Mart (WMT) is offering a benchmark 10 year. The price talk is 200 which is a concession of maybe 10 basis points to comparables.