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Crescent Capital Co-Founder and Milwaukee Brewers owner, Mark Attanasio sat down with Bloomberg TVs Market Makers to discuss the bond business from the 2014 Milken Global Conference in Los Angeles.
Attanasio who worked for Michael Milken during the heady days of 1985, when Milken was at the height of his power. Said that the whole of 1985 saw $14 billion of new issuance. Compare that to last weeks $21 billion Numericable deal, the largest ever single junk bond deal and you can see how the market has changed.
Attanasio went on to say that the junk bond market has certainly matured. Its over $1 trillion in size now. But while market size has grown significantly, coupons have shrunk. “We had a lot of transactions in the mid eighties with 15 to 20 percent yields. With the Numericable deal we have something like 4 percent.
When asked, what’s most exciting now in junk bonds? Attanasio said. “There’s still opportunities providing finance to middle ranking companies. Banks are being regulated out of making loans, so as investors we can help fill that gap.”
Attanasio also said investors behavior has also changed in the last five years or so. Five years ago, investors were asking. How fast can I get my money back? Because a lot of funds, were lacking cash. Now everyone is flush with cash, so they want you to put it to work as fast as you can.
Looking to the future, Attanasio said Crescent Capital is looking to move higher in the credit cycle. “We find you can create an advantage for your clients by taking liquidity risk. Anything we can do directly – as we move through the credit cycle, while we have a low default ratio.
That would bring Crescent into direct competition with industry giants, KKR and BlackRock who dominate the space. But Attanasio said we are smaller and more nimble that those guys, we are able to do transactions that are smaller than they do. So our pipeline is pretty full right now.
You can watch the full interview here.
Todays Other Top Stories
Reuters: – Muni bond issuance drops to $5 bln next week. – U.S. municipal bond sales will drop to $5 billion next week, down from around $8 billion this week, according to Thomson Reuters estimates on Friday.
Brick by Brick Investing: – Are “municipal bonds” a good investment right now? – I have written at length about municipal bonds and will continue to harp on this issue until I am blue in the face. I believe the opportunity is far too great to ignore. Other than investing in mid-large cap dividend paying companies I do not know of a better way to compound your wealth passively.
Bloomberg: – California drought spurs bonds for 30-mile tunnels. – California water agencies plan to sell the first $200 million in bonds toward a $25 billion project to bolster supplies for about 25 million people as the worst drought in a century threatens farms and cities.
LearnBonds: – Why the Fed should reconsider its inflationary policy. – The willingness and ability of consumers and corporations to take on ever increasing amounts of debt is an essential piece of today’s fiat monetary system. Therefore, I can only imagine the concern of those in power, when they see the sluggish growth in revolving credit during the post-financial-crisis years.
BlackRock: – Bond Basics: Corporate versus sovereign risk. – As investors re-evaluate their bond portfolios in today’s rising rate environment, Matt Tucker discusses several things to consider when weighing corporate and sovereign bond risks.
Market Realist: – How to measure your portfolio’s interest rate risk with convexity. – Portfolio durations differ from key rate durations, as even though the durations of two portfolios may match, both portfolios may differ in the maturity profiles of the bonds they comprise, which will result in differing key rate durations.
ETF Trends: – Renewed demand for Treasuries props up bond ETFs. – U.S. banks are hoarding Treasuries in response to new liquidity rules, bolstering Treasury bonds and related exchange traded funds.
Zerohedge: – Goldman Sachs strongly suggests clients sell them their Treasury bonds. – Goldman Sachs says there is a slow awakening of Treasury bears and recommends shifting from a neutral to short-duration position in bonds… one can’t help but wonder just what the bank will do with all the bonds clients sell to them.
Bloomberg: – Treasuries drop first time in 6 days on outlook for Fed policy. – Treasuries fell for the first time in a week before Federal Reserve policy makers begin a two-day meeting tomorrow at which they are forecast to further scale back bond purchases they have used to support the economy.
WSJ: – Treasury bonds pull back after last week’s rally. – Treasury bonds pulled back Monday as investors cashed out some chips from last week’s price rally. In recent trading, the benchmark 10-year note was 4/32 lower, yielding 2.682%, according to Tradeweb. When bond prices fall, their yields rise.
FT: – Apple prepares for $17bn jumbo bond sale. – Apple is preparing the groundwork for another blockbuster debt sale in the region of $17bn that could rank as the second-largest corporate bond sale of all time. The world’s most valuable company said last week that it planned to increase its share buyback from $60bn to $90bn, funded by domestic and international bond sales.
Income Investing: – Barclays boosts 2014 junk-bond return forecast to 6%. – Barclays took a look at a junk-bond market that’s already returned 3.5% so far in 2014 and decided it’s a good time to revise it’s 3.5% full-year return forecast. Coming into the year, Barclays predicted junk bonds would return between 3% and 4%, which would have meant underperforming the market average yield of 5.67% back on Jan. 1.
Global News on Invest: – Junk bond fever hits new high. – Companies with low credit ratings learned a valuable lesson this week: investors will queue up to lend to them, and expect relatively little in return.
Wellington Financial: – Do O’Leary’s “Low Risk” retail investors know they’re long junk bonds? – It’s that time of year again. The Easter Bunny brings us the annual financial statements for Kevin O’Leary’s shrinking fund management business. I’ve had a look at a few funds so far, and what has struck me is the high proportion of sub-investment grade bonds that KO is holding in mutual funds that otherwise sound pretty generic.
Businessweek: – Junk-bond skeptics squeezed as JPMorgan sees tears only in 2015. – It may seem inevitable that the riskiest corporate debt will lose value, since investors are getting paid about the least ever to own such bonds. Yet after bearish wagers on the biggest junk-bond exchange-traded funds surged to a record last month, the market just keeps on rallying.
ETF Trends: – After S&P downgrade, consider ETFs with Russian bonds. – Last Friday, equity-based Russian exchange traded funds, fell to their lowest levels in five weeks after Standard & Poor’s lowered its rating on Russian sovereign debt to BBB-, the lowest investment grade. Russian ETFs now offer a great value opportunity with Russian bonds rating just one level above junk status and on par with more fiscally challenged Brazil.
Global Financial Conferences: – Is a wave of emerging market crises brewing? – Financial markets in many developing economies have encountered some volatility this year, and Russia has not been immune to these tremors. Indeed, the Russian ruble recently dropped to its lowest level against the U.S. dollar since the global financial crisis of 2008-09. Does this recent volatility portend another wave of financial crises sweeping through the developing world as in 1997-98?
FT: – Investors place bet on insurers’ catastrophe bonds. – Yield-starved investors are gambling that mother nature will be kind this year as they flock to a risky type of insurance-linked debt known as catastrophe bonds.
LPL Financial: – The yield decline resumes. – Bond yields resumed a downward trend during the first quarter of 2014. After rising for much of 2013, better valuations, slower-than-expected first quarter 2014 economic activity, China growth concerns, and geopolitical fears over Ukraine-Russia helped push prices higher and yields lower, led by longer-term securities. Income-seeking investors can take solace, however, in yields remaining near two-year highs for many high-quality bond sectors.
Think Advisor: – Bonds, equities back in favor. – The latest fund flow figures from Morningstar show that investors added close to $40 billion to long-term U.S.-domiciled mutual funds in March. This movement included “strong flows” to developed international markets as well as “a rebound” in flows to intermediate-term bond funds.
Think Advisor: – Get ready for rising rates. – One of the big stories these past couple of months came from Federal Reserve Chair Janet Yellen’s FOMC press conference on March 19 when she indicated that the U.S. central bank could start to raise interest rates six months after ending asset purchases, which, if correct, moves the rate hike timetable up by about six months.
Financial News: – Great rotation from bonds to equities is finally underway. – For so long an unfulfilled prediction, the “great rotation” out of bonds and into equities is becoming a reality, according to a world survey of asset managers’ investment intentions.
PIMCO: – Global central bank focus. – While the Fed’s qualitative guidance may have increased uncertainties over monetary policy, volatility will likely remain contained by powerful short- and long-run forces related to the economic outlook.
Reuters: – DoubleLine’s Gundlach suggests shorting homebuilders. – Home ownership rates in the United States will likely fall to levels last seen in the 1980s as baby boomers retire and millennials wait longer to form households, the manager of the DoubleLine Total Return fund said Friday, recommending that investors short exchange-traded funds focused on homebuilding companies.
Denver Post: – Minding the tax bite in mutual-fund investing. – Now that April 15 has passed, investors have a chance to reflect on what drove their tax bills and rejigger their portfolios. For most retirement investors, the answer is simple: Keep your mutual funds in a tax-advantaged account, whether that’s a 401(k), individual retirement account or Roth IRA.
Reuters: – Numericable shows bonds topping loans in leverage rivalry. – French cable company Numericable is the latest company raising leveraged debt in the US to boost high-yield bonds at the expense of leveraged loans. The move, which highlights the strength of the bond market, is a blow for loan investors.
Hard to process the extent to which Detroit – in bankruptcy court – is returning to its old shenanigans
— munilass (@munilass) April 28, 2014
Panic to buy in before turnaround Tuesday.
— Ed Bradford (@Fullcarry) April 28, 2014