FOMC – Who Is Happy Now ?
Who says the Fed does not work for the banks ? And their AFS books into the 3Q end in less than a fortnight. Bless those profits, coming back in time for book closing and bonus numbers !
“The last time we looked at the impact of the ongoing rates blow out on banks’ “available for securities” books, we found the biggest monthly drop in unrealized gains……This is the most negative the AFS number for the commercial banks operating in the US, has been since late 2009.” 2 Sep Source : http://www.zerohedge.com/news/2013-09-02/unrealized-losses-commercial-bank-available-sale-securities-plunge-2009-levels
But all this QE is not going to make JP Morgan re-open their student loan business which they just closed or their mortgage business ! Wells Fargo following suit and BOA already did.
By Dakin Campbell
Sept. 18 (Bloomberg) — Wells Fargo & Co., the biggest U.S.
mortgage lender, is cutting about 1,800 jobs in its home-loan
production business as an increase in mortgage rates curtails
borrower refinancing demand.
“Oct 12, 2013 onwards, JPMorgan will cease taking new student loan applications, having already restricted its student loans to Chase customers since the past year. ” 6 Sep.
http://finance.yahoo.com/news/jpmorgan-exit-student-loans-biz-173002468.html
JPMorgan Chase & Co. says it plans to close its mortgage call center in Albion, putting about 400 people out of work. 7 Jun. http://news.wbfo.org/post/jpmorgan-chase-closing-400-person-albion-office
TAMPA, FL-JPMorgan Chase plans to close several business units whose mission is to provide assistance to distressed homeowners by this fall. The job cuts will be divided between two locations near Tampa International Airport. 12 Aug. http://www.globest.com/news/12_668/tampa/finance/JP-Moran-Chase-Closing-Mortgage-Aid-Units-in-Tampa-336529.html
JPMorgan Chase said Thursday it plans to lay off 730 San Diego workers from its loan-servicing business as home refinances and foreclosures dry up. 8 Aug. http://www.utsandiego.com/news/2013/aug/08/realestate-chase-layoffs-jobs-mortgage-underwater/
“Bank of America Corp. (BAC:US), which fell to fourth in U.S. mortgages last year as it scaled back after buying Countrywide Financial Corp., is reducing capacity further as surging interest rates crimp demand. The Charlotte, North Carolina-based firm is eliminating 2,100 jobs and closing 16 offices by Oct. 31, said two people with direct knowledge of the plan. ” 10 Sep.
http://www.businessweek.com/news/2013-09-10/bofa-cuts-jobs-as-mortgage-slump-ensnares-jpmorgan-wells-fargo
But NOT TO WORRY BECAUSE “Even as the rest of America pulls back on mortgages, the wealthy are going on a borrowing binge.” http://www.cnbc.com/id/101022158 The wealthy are too big to fail and cheaper to service. Sell 1 jumbo mortgage = 20 mini mortgages.
But before you think this is bad. Look at the UK.
“Communities across the UK have lost more than 40% of their bank and building society branches since 1989, according to a new report.” 19 Aug http://www.bbc.co.uk/news/business-23759025
SO WHAT IS BERNANKE TRYING TO DO ?
JP Morgan has $6.9 billion in fines (excluding London Whale losses) and $16 billion in legal fees to settle. http://www.ritholtz.com/blog/2013/08/jp-morgan-6-9-billion-in-fines-unknown-billions-in-legal-costs/
We need results that look like this.
WSJ 13 Jul : JP Morgan Chase’s second-quarter earnings rose 31%: $1.60 a share versus $1.21 a share last year.
I think we have an end goal in sight here.
I’m told by a highly unreliable but incredibly good friend that today Singaporean Banks have been dialling-up some of their corporate chums and are now preparing numerous S$ bond and preference share issues, as a result of yesterday’s non-news from bountiful Ben. So I suggest that three other groups who may be happy are …………..
i) leveraged-to-the-hilt (and beyond) companies who can now put away yet more ridiculously-low-coupon issues before rates start to get more sensible, i.e. sometime after tapering commences. And, if I understand correctly, tenors are going to be pushed out further as well. Groan! But I’ll wager they’ll be takers.
ii) Singapore bond dealers. The party gets prolonged.
iii) Those holding REIT investments. Look at the rally on the SGX today.
I note Standard Chartered is today advising its moneyed clients that US Corporate High Yield is the place to be for those liking the fixed income stuff, where they are generally holding a UW recommendation. While not so keen on the Asian or Ozzie denominated paper any more, they appear bullish on prospects for the US$ beyond the near term.
Chin Chin
Yes. I agree.
Now is a good time to unload for the banks and they will be offering some pretty good financing deals to clients to buy. (Shocking that Oxley papers get such high leverage too ! Hearing 75%)
My observation is that coupons do set a precedence and the higher and higher coupons we have been seeing will set a higher hurdle for new bond issues and thus they are switching tactics to eg. the new Guoco 1Y that does not have much to compare against.
US and EUR names are still favoured but high yield ? is dicey to me. Lending is starting to freeze up again.
http://blogs.wsj.com/moneybeat/2013/09/20/fx-math-lending-conditions-key-to-fed-decision/
I would definitely still stick to liquid high grades and govis. And if you had bought the latest 20Y SGD govi, it would have been almost 6% return for less than a month.
Why risk high yield ? and who says bonds are meant to be hold till maturity ?
That’s why it is called fixed income. /sarcasm
Seriously… tapered is postponed. not avoided. i would take this opportunity to reduce duration. but what do i know compared to so called analyst.
Even the biggest fund Bridgewaters is going long bonds now because FED is in a hostage crisis now.
I.E. Fed is the Hostage !