Passa ai contenuti principali

Here Are The Energy Bonds Getting Crushed This Morning

With oil prices cratering by almost a third, the math is simple: junk-bond (and in some cases IG) funded shale producers, which were already cash flow negative when WTI was trading around $50, are about to become cash incineration machines and will almost certainly be forced to default in the coming months - perhaps as soon as the next interest payment, certainly by the next bond maturity which they will no longer be able to rollover as the junk bond market is now frozen - unless oil somehow stages a miraculous recovery from here.

As such, the market was focused on how shale-linked bonds will react to this weekend's oil price shock. Addressing this issue, Goldman sent an email early on Monday in which the bank made the following points for those looking at energy debt:

  1. Credit markets were having problems before the Saudi announcement, credit down when equities traded higher
  2. Significant increase in non-credit accounts looking to short the sector last week
  3. Last week saw record outflow across IG, high yield and loans
  4. Liquidity issue even more prevalent because of virus related contingency /  BCP planning

The bank concludes by noting that "although clients are better positioned than in 2015 (when had a lot of energy issuance to fund shale revolutions); expect continued selling as oil re-prices lower and the virus spreads."

That said, much of the selling appears to have already taken place this morning, with select energy bonds already in freefall as of this morning, including issues from Range Resources, SM Energy, Southerwestern Energy, Whiting Petroleum and Oxy.


Yet despite the sudden repricing of stressed energy bonds lower, one can again note that energy credit was well ahead of the oil market, which has finally caught down to the HY Energy OAS spread.

Expect many more E&P bonds to join the liquidation fray before the day is over.

Commenti

Posta un commento

Post popolari in questo blog

Fwd: The Looming Bank Collapse The U.S. financial system could be on the cusp of calamity. This time, we might not be able to save it.

After months  of living with the coronavirus pandemic, American citizens are well aware of the toll it has taken on the economy: broken supply chains, record unemployment, failing small businesses. All of these factors are serious and could mire the United States in a deep, prolonged recession. But there's another threat to the economy, too. It lurks on the balance sheets of the big banks, and it could be cataclysmic. Imagine if, in addition to all the uncertainty surrounding the pandemic, you woke up one morning to find that the financial sector had collapsed. You may think that such a crisis is unlikely, with memories of the 2008 crash still so fresh. But banks learned few lessons from that calamity, and new laws intended to keep them from taking on too much risk have failed to do so. As a result, we could be on the precipice of another crash, one different from 2008 less in kind than in degree. This one could be worse. John Lawrence: Inside the 2008 financial crash The financial...
Posta un commento
Continua a leggere

Charting the World Economy: The U.S. Jobs Market Is On Fire - Bloomberg

Charting the World Economy: The U.S. Jobs Market Is On Fire - Bloomberg https://www.bloomberg.com/news/articles/2019-12-06/charting-the-world-economy-the-u-s-jobs-market-is-on-fire Charting the World Economy: The U.S. Jobs Market Is On Fire Zoe Schneeweiss Explore what's moving the global economy in the new season of the Stephanomics podcast. Subscribe via  Apple Podcast , Spotify or  Pocket Cast . The last U.S. payrolls report of the decade was a doozy, beating expectations and doing its bit to keep the consumer in good health heading into 2020. That's good news given the various pressures still weighing on global growth. Here's some of the charts that appeared on Bloomberg this week, offering a pictorial insight into the latest developments in the global economy. U.S. Advertisement Scroll to continue with content ...
Posta un commento
Continua a leggere

The Inverted Yield Curve: Why It Will Not Lead To A Recession This Time | Seeking Alpha

The Inverted Yield Curve: Why It Will Not Lead To A Recession This Time | Seeking Alpha The Inverted Yield Curve: Why It Will Not Lead To A Recession This Time Apr. 23, 2019 8:41 AM ET Historically, an inverted yield curve has invariably led to a recession. We are currently experiencing an inverted yield curve. We have two reasons for the current inverted yield curve: the central banks irrationally raising short-term interest rates and investors expect a recession because of the extended boom period. The two reasons are not enough to lead to a recession, and other structural changes in the economy are pointing to a boom rather than a recession. Investors can capitalize on the current situation if they believe that the inverted yield cure would not lead to a recession. Summary and Paper Thesis Although an inverted yield curve led to a recession almost without exception in the last 50 years within a relatively short period of time after the inversion happened, this pap...
Posta un commento
Continua a leggere