Wednesday, April 22, 2009

Loans Versus Bonds Relative Value: Week Of April 16

Some massive tightening in the universe of 30 tracked names with both major loan and bond moves. The average loan spread tightened by 100 bps to 700 bps while bonds tightened by almost 200 bps to 1,381 bps from two weeks ago. Taking a cue from the equity markets, the most horrendous HY names saw the biggest tightening with Neiman Marcus and Sealy Mattress bonds both collapsing by over 800 bps. Curiously Sealy's loan only tightened by 20 bps, implying a long loan, short bond trade could be a good continuation trade here. The inverse is true with Cenveo, which saw its loans tighten by over 400 bps, while the bonds tightened a mere 207 bps (with TRS being a little tough to find these days, a one side bond long may be the most feasible trade).

source: Reuters/LPC Loanconnector Sphere: Related Content
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