This Week in Corporate Finance (04/12/13)

This was another week where the equity markets touched new or multi-year highs, the bond market sold off a bit, and the economic outlook is lukewarm at best. Time will tell if we have finally moved to a period of determining how fast the US economy is growing, rather than asking: is the US economy growing?

For the week, the US 2-year note yield was up +1bp to 23bps; the 5-year note yield was up +2bps 69bps; the 10-year note yield was up +4bps to 1.72%; and the 30-year bond yield was up +8bps to 2.92%.

On the equity front, we are all getting ready to put on our Dow 15K caps, as the Dow hit a new all-time high of 14,887.51. The S&P 500 touched an all-time high of 1,597.35 and the NASDAQ reached another twelve-year high of 3,306.95 (think ‘N Sync’s “It’s Gonna Be Me”).

In Europe, it was a similar “risk-on” trade as money moved out of the safest investments, into those offering a bit more yield. In Germany, the 30-year Bund yield was +9bps higher, closing the week at 2.18%; the 10-year Bund yield was up +5bps to finish at 1.26%; and the 2-year Bund yield was +1bp higher, to settle at +2bps. In France, the 10-year Oat yield was +6bps higher, ending the week at 1.81%.

Some of this money moved into countries like Italy, Spain, and Portugal, as their yields all fell by a similar amount. In Italy, the 10-year note yield fell -5bps to 4.33%; in Spain, the 10-year note yield dropped -6bps to 4.69%; and in Portugal, the 10-year note yield fell -5bps to 6.31%.

The big winner of the week was Greece, as its 10-year note yield plummeted -77bps to 11.38%.

Corporate bond issuance was a bit on the light side this week at $23 billion. Leading the pack this week was CNCP with their $2 billion three-tranche deal comprised of $750 million of a 3-year note, $500 million of a 5-year note, and $750 million of a 10-year note. Dollar General was also in the market with their $1.3 billion two-part offering consisting of $400 million of a 5-year note and $900 million of a 10-year note.

In money-market land, 3-month LIBOR touched a 20-month low falling to 27.71 bps.

On the commodities front, gold actually fell into bear territory this week as its price fell to a low of $1,493.35/oz. Gold has now fallen more than twenty percent since it all-time high of $1,920.30/oz, back in September 2011. This is the first time gold has been in a bear market in twelve years.

Oil fell as low as $90.27/barrel (WTI) on fears that the global demand for energy will be less than previously expected.

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