This Week in Corporate Finance
Global Capital Markets
JPMorgan sold $4 billion of 13-month extendible notes with a final maturity in December 2015
Travelers raised $500 million selling catastrophe bonds, the biggest issuance this year of securities that allow investors to bet against natural disasters.
U.S. Treasuries
Treasuries dropped, pushing 10-year yields to the highest level in four months.
The yield curve widened to a record as investors bet an accelerating recovery will fuel inflation and hurt demand for unprecedented government debt sales.
LIBOR
The cost of borrowing between banks was unchanged. The rate on three-month Libor remained at 0.2488 percent.
Fed
Federal Reserve tests of tri-party reverse repurchase agreements have “gone extremely well,” according to the head of the industry group working with the central bank on the transactions.
The Federal Reserve Bank of New York has drained $990 million in reserves from the banking system through five trials this month as part of its “tri-party reverse repo operational readiness program” announced Nov. 30. The central bank stressed at that time that the tests don’t represent a change in policy and were one tool at its disposal for the eventual withdrawal of the unprecedented monetary stimulus added to the economy.
Banking
Seven U.S. banks were seized by regulators, bringing this year’s total of failed lenders to 140. The banks with $14.4 billion in total assets were closed in six U.S. states. The FDIC is overseeing the dissolution of banks at the fastest pace in 17 years.
Earlier this week, the FDIC boosted its 2010 budget by 56 percent to $4 billion to manage further shutdowns. The total budget will increase from $2.6 billion and the set-aside for bank failures doubles to $2.5 billion over this year, according to a proposal approved by the FDIC board. The agency staff will increase to 8,653 next year from 7,010 this year.
Credit Ratings
Greece had its credit rating cut one step to A2 by Moody’s. The ranking is the lowest among the 16 euro-member states and the same as that of Poland and Botswana.
AIG’s consumer lender was downgraded to junk by Moody’s Investors Service on prospects the bailed-out insurer may stop supporting the unit after November 2010.
Nokia Oyj’s credit rating was cut by Fitch, which cited increased competition for the world’s biggest maker of handsets in the smart-phone market, the industry’s fastest-growing segment. Fitch cut Nokia’s long-term debt to A-, four levels above junk, or non-investment grade, from A, the London-based ratings company said in a statement. It was Fitch’s second ratings cut on the debt this year, the first being in July. It said the outlook on the debt is stable.
Bankruptcy
Citadel Broadcasting Corp. filed for U.S. bankruptcy protection in Manhattan with a deal to shed $1.4 billion of debt.
CDS
The cost to protect U.S. corporate bonds from default fell to the lowest since January 2008, trading in a benchmark credit derivatives index shows.
Munis
The municipal market is completing a record year for fixed-rate sales after U.S. state and local governments shunned variable-rate issues and employed new federal subsidies to broaden demand for their debt.
