High yield bonds selling such as 2007
representation of the financial crisis will
High-yield bonds tumbled trading assets price hit hard, fund foreclosures.Wall Street as if it is 2007's nightmare.
Strategist at deutsche bank Jim Reid wrote on Monday, the turmoil this month, including the Management, Third Avenue to suspend its high-yield bond mutual funds in cash redemptions, could be a momentous upheaval to aura.George Cipolloni Berwyn Income Fund said that now the market before the financial crisis and there are too many similarities between and difficult to ignore.
However, traders and analysts said it will not cause another financial crisis - have not caused at least.
"I don't think it has any systemic risk," the KBW Inc.Analyst Fred Cannon, said the situation is more similar to the dotcom bubble burst, and less like weakened the financial system of the credit crunch."If it's a sign that the recession, then have to believe that because of the associated with large Banks, should be more similar to the economic downturn in 2001 instead of 2008."
Fund performance worse this year due to lower energy prices, customers seek out too much, Third Avenue and Stone Lion Capital Partners, management of the fund has stopped the cash redemptions.In 2007, bear stearns and BNP paribas after the subprime collapse in investment value, its funds are suspended redemptions;Become the next two years, more large bank losses and liquidity problems early signs of shock the global economy.
Market participants said, "dodd - frank bill" in five years, carrying out the banking capital improvement, low debt stock liquidity decreases, not materially affected by the spread of high-yield bonds fell.U.S. companies are likely to be affected by more widely, because in the past five years, American businesses have been based on hunger bond markets to get cheap financing, and fund acquisitions, dividends and buybacks.
By the end of September, five major Wall Street Banks trading accounts held $6.7 billion was designated as the third level of corporate
bonds, because these bonds illiquid and hard to value.Holdings of bonds in the ordinary share capital of a combined $803 billion accounted for less than 1%.But at the end of 2007, lehman brothers on the trading account, in the third grade of mortgage-backed securities and the $25.2 billion of asset-backed securities, beyond the $21.4 billion of its equity capital.
Although difficult trading environment could lead to more bond is divided into the third grade, but the tougher capital and liquidity rules requirements, banking stocks continued to cut corporate bonds this year.In the first nine months of this year, Wall Street's top five Banks reduced more than 20% of the corporate bond holdings, a drop of $27 billion.Cutting stock limits the risk exposure, but also caused the investors complain that part of the bond is more difficult to deal.
"Brokerage in reducing the balance sheet, does bring liquidity challenges, but also ease the during the financial crisis, the balance sheet to the risk of contracting sharply,"Morgan Stanley(32.84, 0.96, 3.01%) analyst Adam Richmond wrote in Monday's report.
Promised to investors to quickly redemptive capital since 2008, the number of junk bond fund has soared since September, for zero stimulated demand for higher-yielding investments.Bloomberg,
according to data from the assembly now based in the United States the high yield of exchange traded fund (ETF) 35, assets under management of $43 billion, compared with 2008, there are three funds, assets under management of $1.3 billion.The number of mutual funds has risen from 2008 in 100 to 252, the assets rose from $126 billion to $326 billion.