Chris White: Tracking the action on bank debt
Our next guest has been tracking the action and bank debt over the past week says the street might be underestimating just how well the big banks will do Chris White joins us with his observations co of Bond Click Chris Great to have you with us I'm a what are you see the debt markets pressing in for the banks? Could be here Melissa seeing the banks is in the lead up to earnings. Next week, we saw a rally across the board in the banking sector when you're looking at corporate debt. Heavy buying banks usually lead the activity in terms of the overall market. So is no different last week, but every single name in the top twenty by volume tightened according to the data that we're looking at. So looks like people are positioning themselves for a positive call from the banks in terms of earnings. So positive immediately but farther out in the future what are investors anticipating? A great question? You know if you look at where the buying is occurring in the marketplace What we're seeing is really a difference between investors the way that they're treating the front end looking at banks like their you're in debt was very popular. There was net buying activity there. But in the long and we actually saw net selling I think with bond investors are saying is in the short term, they think that banks look good now but longer term I think there are still lots of question marks and given that banks are so tightly coupled with policy in terms of how they do going forward I think that's a really smart bet so. Bond investors seemed to be placing. A lot of their interest in just buying the debt that's going to be maturing the next five years. Yeah. If it's Karen thanks for being on when you talk about the further out dead trading is that is that a function of a thought on rates or that's much more specific to the underlying credit? Well. The further you go go out on the credit card, the more risk that you're taking on. So it looks like the reaction that the market's having is everyone seems to believe that bank debt. From A. Value Standpoint. Is something that they want in their portfolio. However, how long do you WANNA be holding bank bonds as we're there seems to be a bit of a disagreement with when you see net selling in the long end that's usually an indication that. From. A volatility perspective people aren't willing to take bigger longer term bet that has more risks in this particular name, I think given that just. Simple things in the Fed policy, not just the discount rate a direct bond buying in the secondary market by the Fed, has a direct impact on Fiqh revenues, which we all know are massive part of how banks make money I think it's important that people watch what the Fed is saying before they start making longer term bets on bank debt.