Bond Market Likes Bernanke Comments, Yields Drop
The market is selling off in early trading, which is not surprising given the news that Bear Stearns (BSC) is saying that its two trouble hedge funds are nearly worthless. This raised the already elevated fears about the subprime market. Not to mention that in his speech, Bernanke said the subprime sector is likely to get worse before it gets better.
But Bernanke also made dovish comments about inflation, and the market is taking those comments to heart by pushing bond yields lower again. The yield on the 10-year note is now back down to 5.0%. This should be a big positive for stocks.
The CPI news was also pretty benign, showing the smallest rise since January. In M&A news, KKR is said to be mulling a $24 billion bid for Macy's (M).
But I would be remiss if I did not point out that the reaction to earnings reports so far has not been positive. Look at all the stocks that reported last night and this morning, and they are all lower. The reaction to YHOO, INTC, PFE, UTX, etc. have all been negative.
Now it is true that some of these stocks were extended, and due for a pullback. But if this trend continues, it does not bode well for the next few weeks.
long INTC, UTX
posted by J. Kahn @ 8:15 AM
2 comments
2 Comments:
Who are the main investors in these big brokerages' internal hedge funds? Are these usually the high net worth individuals who use the brokerage as their advisors/planners or is it mainly institutions investors - pensions, endowments, and the like? Or is it mainly the brokerage's own money that they are running (and, I would assume, the reason for all of these earnings beats over the past few years for GS, BSC, LEH, etc.)?
Mostly HNW individuals as well as institutional hedge fund of funds.
The prime brokers usually don't invest their own money in these outside funds, but Bear did loan some money to one of these funds as a quasi-bailout.
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