Thursday, February 19, 2009

Smurfit CDS Auction Yet Another Opportunity For Free Money

Smurfit Stone's CDS Auction concluded at 2pm today with a final clearing price of 8.875, a whole 100 bps over the Inside Market Midpoint of 7.875. Whoever got hit - congratulations as the bonds were bid 9.5 post auction, an 7% immediate pick up.

The auction's final closing price was curious as this was the first time in ISDA auction history where the midpoint was lower than the final clearing price. The high final price was a factor of several significant bids at 8.875, most notably $100 million by Barclays which scooped up almost 80% of the entire $128 million auction. As the auction was relatively smaller than Nortel and of course Lehman, it may be not truly indicative of trending datapoints, nonetheless here are the conclusions. Barclays, JP Morgan, and Goldman are still the only truly active desks (and/or B/D with legitimate hedge funds clients that have the liquidity to put in limit bids). Deutsche Bank, Citi, UBS, BofA and Credit Suisse continue posturing, unable to provide any even remotely relevant bids and merely bidding for the sake of bidding, which is due either to lack of trade desk capital or no hedge fund accounts who they could convince to bid in context. Most amusing is Citi 100 million bid at 0.5 which doesn't even deserve a comment.

Final clearing price: 8.875

Weighted average limit price based on indicated notional and levels: 5.67
Sell limit orders total notional: $128.68 million
Total broker expressed bid notional interest: $1.1 billion
Bid Interest to Sell order ratio: 11.6%
Brokers expressing notional interest and limits (sorted by proposed limit price):

Bank of America: $2 @ 7.00
Barclays: $265 @ 8.31
Morgan Stanley: $122 @ 7.34
RBS: $27 @ 7.81
BNP Paribas: $2 @ 7
Goldman Sachs: $248 @ 4.45
JP Morgan: $158 @ 7.92
Credit Suisse: $2 @ 6.25
Deutsche Bank: $131 @ 2.63
UBS: $7 @ 7
Citigroup: $174 @ 1.23 Sphere: Related Content
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Anonymous said...

there have been several auctions recently where the final settled above the mid - including the icelandic auctions. There is a ceiling a dollar above the inside mid for limit orders.

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