Interest Rate Roundup

Tuesday, April 01, 2008

Capital raising everywhere ... plus the latest economic news

Lots of things to to keep on top of this fine morning. A few quick hits ...

* Lehman ended up selling $4 billion in preferred shares, with a coupon of 7.25% and a conversion price (each preferred share can be converted into 20.05 common shares) at $49.87.

* Thornburg Mortgage managed to sell common stock, warrants and other notes for $1.35 billion. The jumbo-focused mortgage lender has been combating liquidity issues for several months.

* In the "worst kept secret ever" department, National City says it is reviewing "strategic alternatives" with the help of Goldman Sachs. That's corporate-speak for "We're considering selling the company." This has been rumored for some time.

* The global bank UBS AG said it is looking to raise 15 billion Swiss francs (about $14.8 billion), in addition to the 13 billion francs ($12.8 billion) it has already raised, to shore up its capital base. It's also writing down a stunning $19 billion of debt securities. That brings the total writedowns to date to almost $38 billion.

* Meanwhile, the biggest bank in Germany, Deutsche Bank, said it would take $3.9 billion in writedowns in Q1. The writedowns will cover residential mortgage backed securities, commercial real estate, leveraged loans, and a partridge in a pear tree ... er ... just kidding about that last one.

On the upside, the ISM manufacturing index came in slightly better than expected (48.6 in March vs. the 47.5 forecast and the prior month's 48.3). The new orders sub-index fell to a new cycle low, however (46.5 from 49.1 in February), and the prices paid subindex surged to a new high (83.5 from 75.5).

Construction spending (PDF link), for its part, was down 0.3% on the month vs. a forecast for -1%. I like to focus on the private spending category in particular -- private residential spending dropped another 0.9% on the month, while private nonresidential spending slipped 0.1%. The office market was weak at -2.2%, as was the power category. But transportation spending popped 2.6%.

So how can we sum it all up? Good news for stocks, bad for bonds, because the economic news is marginally better than expected and because some "safe haven" money is coming out of Treasuries. Long bond futures were recently off by just over a point, while 10-year note yields were up by just over 12 basis points.


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