Morning Report 9/5/12

Vital Statistics: 

  Last Change Percent
S&P Futures  1403.6 -2.4 -0.17%
Eurostoxx Index 2439.2 2.6 0.11%
Oil (WTI) 95.58 0.3 0.29%
LIBOR 0.41 -0.002 -0.49%
US Dollar Index (DXY) 81.21 -0.105 -0.13%
10 Year Govt Bond Yield 1.58% 0.01%  
RPX Composite Real Estate Index 192.1 -1.0  


Stock index futures are lower after the ECB released its blueprint for unlimited bond purchases and FedEx warned. A positive surprise in productivity was offset by higher unit labor costs. Bonds and MBS are flat.

The ECB has declined to put a cap on yields and will sterilize bond purchases to prevent inflation. The plan will also focus on short term government debt with maturities up to 3 years. Bill Gross must have gotten the advance word, as he tweeted yesterday “Draghi appears willing to write 2-3 year “checks” to peripherals. Very relationary.  Buy gold, TIPS, real assets.”  The Bundesbank is anticipated to be the only objection. 

The CoreLogic Home Price Index grew at 3.8% and the early indication for August is + 4.6%.  Excluding distressed sales, August is expected to come in + 6%. While they anticipate a seasonal slowdown in the growth rate, they are forecasting a gain for the full year 2012. 

Toll Brothers just priced a convertible bond issue.  $250MM, 20 year senior debt, 50 basis point coupon, 50% premium. Japanese coupon, American premium.  Old school convertible arbs are shaking their heads at that one. Credit Crunch?  What Credit Crunch? Arbs better hope the company never institutes a dividend because that bond will get smoked.

Ally is auctioning off 4 billion of subprime loans.  There has been a lot of money raised for distressed mortgage purchases in the last year, and Nationstar, Fortress, and Berkshire Hathaway are some of the high profile bidders. GMAC expects to emerge from Chapter 11 sometime in Q113.

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