March 4. US looks ok, but the rest of the world is giving off bad vibes

–Yields rose Tuesday (perhaps unsurprisingly as Activas sold $21b in bonds) with the ten year note up just over 4 bps to 212.1. Some of the near eurodollar calendar spreads edged to new highs, for example Dec’15/Dec’16 one-yr spread rose 2 bps to 90.
–While the situation in the US reflects continued recovery (ignoring yesterday’s misses in auto sales), some other markets signal concern with global demand. Alibaba shares made a post IPO low… just problems with China, or something more? Sugar futures, and coffee, plunged to new lows. Just a stronger dollar and problems in Brazil, or something more? India cut rates today, lowering its policy repo rate 25 bps to 7.5%, its second inter-meeting cut this year. Bloomberg notes that China is expected to cut again, and that Australia’s economy grew lower than expected last quarter.
–Economic news in the US today includes ADP expected 220k, and Service ISM expected 56.5. Beige Book in the afternoon.
–Not everybody is able to borrow at zero rates… “Springleaf showed that the average interest rate on its outstanding loans has been around 26% to 27%.”
“…The resulting company will now be, by far, the biggest lender to consumers with lower credit scores in the country. It will have nearly 2,000 branches in 43 states, through which it provides personal and auto loans at high interest rates to customers with little access to other forms of credit.
A recent investor presentation by Springleaf showed that the average interest rate on its outstanding loans has been around 26% to 27%. Losses for bad loans have been trending below 5%, leaving an effective yield earned by Springleaf near 22%. Springleaf personal loans average $4,000 to $5,000 in size and 40 months in term. Typical uses are for debt consolidation, home or car repair or medical bills.
HAHAHAHAHA…debt consolidation. Good one.

Posted on March 4, 2015 at 4:59 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply