A long weekend

June 22, 2020

–Little change in rates on Friday and on the week as a whole.  Ten year ended at 69.7 bps from 69.9 the previous Friday.  Stocks took a late tumble but are back up this morning.  

–A Reuters article notes a decline in the Fed’s balance sheet as swap lines to foreign central banks are not being rolled.  The conclusion is that the dollar crunch has abated and is probably over.  The eurodollar futures market concurs, with low straddle prices and a stable libor rate.https://www.reuters.com/article/us-health-coronavirus-fed-conditions-ana/global-dollar-crunch-appears-over-as-central-banks-rely-less-on-fed-backstop-idUSKBN23T0HP

–There’s been a reasonable amount of press about Wirecard, the German company where €1.9 billion has either gone missing or was never there in the first place.  Deutsche Bank was the original lender of €150 million to the founder of the company Markus Braun.  The loan was backed by shares which have now lost three quarters of their value and is being called due to breached covenants.  In and of itself, this doesn’t seem like a big deal.  However, the trend toward ‘covenant-lite’ loans which are now going bad IS a big deal.  The article below (from February when stocks were at their peak) gives some background.  “…breaches [of covenants] can act as an early-warning system and force equity sponsors to the table to discuss a turnaround plan.”  Of course, if the Fed just buys these loans I guess it doesn’t really matter. 

Waiting for the explosion: The dangerous game of covenant-liteWaiting for the explosion: The dangerous game of covenant-lite. Fewer covenants can provide greater flexibility in dealing with portfolio company difficulties, but they may also prevent lenders from negotiating rescue plans with borrowers and sponsors.www.privateequityinternational.com

–In Chicago news from the Tribune, “At a Sunday news conference on the weekend violence, Chicago police Superintendent David Brown said at least 61 people had been shot in the city through Sunday, and as of Sunday morning, eight young people had been shot, four fatally.”  Brown urged anyone with information on any of the cases to come forward.  The dead included a three year old toddler and a 13 year old girl who was inside her home and struck by a random bullet.  This is gang violence.  I am not quite sure that community organizers are an adequate substitute for police.  https://www.chicagotribune.com/news/breaking/ct-chicago-violence-shootings-20200621-dysixivfqrdgtlffeu3kopi3xy-story.html

Neighbors outraged as toddler, 3 teens killed in weekend violence: ‘This is a horrific Father’s Day. This 3-year-old baby lost his life.’ – Chicago Tribune“A line was crossed,” said the Rev. Ira Acree of Greater St. John Bible Church. “This is a horrific Father’s Day. This 3-year-old baby lost his life. …www.chicagotribune.com

Here’s a website with updated stats,  https://heyjackass.com/

And another from a Chicago cop, http://secondcitycop.blogspot.com/

Posted on June 22, 2020 at 5:41 am by alexmanzara · Permalink
In: Eurodollar Options

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