Positive news overnight from China’s manufacturing sector sent commodities skyrocketing and the dollar suffered as a result. Dollar weakness and a 1.5% rally in stocks lead to a broad selloff in Treasuries. The intermediate section of the curve suffered the worst, not surprising considering the news.
Inflation was the catalyst for yesterday’s move, shown by the outperformance in TIPS (10yr breakevens were wider by 10 bps). The curve steepened by 8 bps on Monday to +244 bps after flattening 32 bps last week.
CIT
CIT took another step toward avoiding bankruptcy yesterday by boosting the price they will pay in a tender offer for notes due August 17. The terms of the offer have changed a few times in the past few weeks, but in its most recent form CIT agreed to pay 77.5 cents on the dollar for the bonds. The offer was bumped to 87.5 yesterday, and the participation needed for the tender to be successful was lowered from 90% of bondholders to just 58%. CIT claims that 65% of bond holders have already agreed to tender their notes.
This is an important hurdle for CIT, but the fight is far from over. The notes being tendered are trading on the open market around 93, a large rally from the low 80’s just a day ago, but still a 28% annualized yield. CIT continues to face a steep uphill battle.
Inflation was the catalyst for yesterday’s move, shown by the outperformance in TIPS (10yr breakevens were wider by 10 bps). The curve steepened by 8 bps on Monday to +244 bps after flattening 32 bps last week.
CIT
CIT took another step toward avoiding bankruptcy yesterday by boosting the price they will pay in a tender offer for notes due August 17. The terms of the offer have changed a few times in the past few weeks, but in its most recent form CIT agreed to pay 77.5 cents on the dollar for the bonds. The offer was bumped to 87.5 yesterday, and the participation needed for the tender to be successful was lowered from 90% of bondholders to just 58%. CIT claims that 65% of bond holders have already agreed to tender their notes.
This is an important hurdle for CIT, but the fight is far from over. The notes being tendered are trading on the open market around 93, a large rally from the low 80’s just a day ago, but still a 28% annualized yield. CIT continues to face a steep uphill battle.
Cliff J. Reynolds Jr., Investment Analyst
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