U.S. Subprime Warming Is Not a Risk Mitigation

Published in China.com
(China) on 24 May 2011
by Liansheng Zheng (link to originallink to original)
Translated from by Rose Zu. Edited by Gillian Palmer.
The repercussions of the international financial crisis that the U.S. subprime crisis triggered still exist. However, the ringleaders of the crime — subprime mortgage bonds (subordinate debt) — have recently warmed up, catching the market’s attention. The latest numbers from Bloomberg show that from June 2009 to the end of April 2011, the value of U.S. subprime bonds increased 43 percent and individual bond prices rose over 60 percent. Subprime bonds have become an important investing target for long-term investors.

After the outbreak of the international financial crisis, more people became aware of the high risk that occurred from financial leverage and the U.S. real estate market entered a de-leveraging process. Because those in the real estate business had to sell assets to pay off their loans, real estate prices and the scope of real estate transactions tumbled. At the same time, real estate credit also underwent an interval of negative growth. The price of U.S. subprime bonds, however, deviated from the related trends in the real estate market, appearing to experience a continuous upward trend, even receiving favor from long-term investing.

Excess liquidity is the root cause of the price rebound of subprime bonds. After the international financial crisis, the U.S. pushed an unprecedented rescue plan: two rounds of quantitative easing and a 0-0.25 percent benchmark interest rate, causing the U.S. financial system to have excess liquidity. Excess liquidity is bound to be configured into various investing schemes, and so even though the yield on subprime bonds has fallen from 10 to 15 percent to today’s 5 to 7 percent, it is still higher than the 3 percent yield of the 10-year U.S. treasury bond and has become investors’ way of increasing yields in their portfolios.

The law of supply and demand is another important factor in the rising price of subprime bonds. In an environment where capital is abundant, subprime bonds are an important part of investors’ strategy to increase yields. High-risk investors also continue their investments, causing an increase in demand for subprime bonds. At the same time, in the post-financial crisis era, the financial systems of developed economies had to be de-leveraged while their risk management strengthened, and thus the supply of subprime bonds shrank dramatically. Under the pull of high liquidity and a gap in supply and demand, subprime bond prices persistently increased.

As can be seen, this turn of increased subprime bond prices is supported by high liquidity, but this kind of support is unstable. On May 11, after the U.S. Federal Reserve announced an auction of $31 billion in subprime bonds, the price of subprime bonds and related bonds fell significantly.

If the subprime bond market wants a stable recovery, then it must still rely on the real estate market. However, the U.S. real estate price index has been falling. The S&P index of housing prices in the 20 largest cities in the U.S. showed a slip of 1.1 percent from February to the end of April, the lowest in 16 years. Additionally, the continued increase in foreclosed homes has also put pressure on the real estate market.

The price increase of subprime bonds does not originate in the recovery of the U.S. housing market or a returned boom in the credit market, and it is certainly not due to freedom in financial risk. U.S. financial risk is not to be ignored: for one, real estate prices continue to fall and risk in the real estate credit market is accumulating. Second, the freedom of liquidity has created an artificial economic expansion. For example, staple goods prices have risen sharply and subprime bond prices are artificially high, which could trigger a new financial risk. Third, the U.S. Federal Reserve is currently the largest debt holder of the U.S. financial market, and the pressure of having assets such as subprime bonds on its balance sheet is becoming more evident. Fourth, the U.S. government’s deficit and the level of public debt continue to climb higher, indicating that the country will face high national credit risk. In short, the warming of subprime bond prices is not an indication of freedom in the U.S. financial risk. Rather, vigilance is needed.


美国次债升温并非风险缓解
【人物】:郑联盛 
 
摘 要:
国际金融危机爆发之后,“杠杆化”操作的高风险为更多人所认识,美国房地产市场也进入一个“去杠杆化”过程。房地产商由于需要偿还借款而抛售资产,导致房价和房地产交易规模不断下降。与此同时,房地产信贷也处于负增长区间。美国的次级债价格脱离了房地产市场基本面的正关联曲线,呈现不断上升趋势,甚至得到长线投资的青睐。

美国次债危机引发的国际金融危机余波尚存,但危机的罪魁祸首——次级住房抵押贷款债券(次级债)近来却逐步升温,引起市场关注。彭博社发布的最新数据显示,2009年6月至2011年4月底,美国次级债价格整体上涨了43%,个别债券价格上扬超过60%,次级债成为长期投资者的重要投资标的。
国际金融危机爆发之后,“杠杆化”操作的高风险为更多人所认识,美国房地产市场也进入一个“去杠杆化”过程。房地产商由于需要偿还借款而抛售资产,导致房价和房地产交易规模不断下降。与此同时,房地产信贷也处于负增长区间。美国的次级债价格脱离了房地产市场基本面的正关联曲线,呈现不断上升趋势,甚至得到长线投资的青睐。
流动性过剩是导致次级债价格回暖的根源。国际金融危机发生后,美国推出了史无前例的救援计划:两轮量化宽松政策,0—0.25%的基准利率,使美国金融体系的流动性过剩。过剩的流动性必然要在不同的投资标的中进行配置,虽然次级债的收益率从危机前的10%—15%降至目前的5%—7%,但仍远高于10年期美国国债收益率的约3%,成为投资者提高收益的资产组合。
供求规律的作用是次级债价格上升的又一重要因素。在资金充足的环境下,次级债成为长期投资者提高收益率的重要资产配置对象,也有部分高风险偏好者对其进行投机操作,导致次级债的总需求不断上升。同时,后金融危机时代,发达经济体的金融体系必须“去杠杆化”,并加强风险管理,次级债整体的供给规模是大幅萎缩的。在流动性宽裕和供需缺口的拉动下,次级债价格持续上涨。
由此可见,本轮美国次级债价格上扬很大程度上是由流动性支撑的,但是这种支撑的需求不稳定。5月11日,美联储宣布拍卖310亿美元次级债后,次级债及关联债券的价格明显下跌。
次级债市场若要稳固复苏,仍要以房地产市场为依托。但是,美国的住房价格指数仍在下跌,4月底公布的标准普尔20大城市房价指数2月份下滑了1.1%,创16年来新低。另外,美国住房抵押贷款止赎规模的持续上升也使房地产市场继续承受压力。
次级债价格上涨并非源于美国房地产市场的实质复苏和信贷市场的有序繁荣,更不是金融风险的有效释放,美国的金融风险也因此不容忽视:一是房地产价格持续下跌,房地产信贷市场风险仍在累积。二是过度释放的流动性导致虚拟经济膨胀,比如大宗商品价格暴涨和次级债价格虚高,可能引发新的金融风险。三是美联储是目前美国金融市场“最大债权人”,其资产负债表中包括次级债等相似资产的整固压力日趋明显。四是美国政府的财政赤字和公共债务水平持续攀高,面临较大的主权信用风险。总之,次级债价格回暖并不是美国金融风险释放的显性标志。美国金融风险仍需警惕。
This post appeared on the front page as a direct link to the original article with the above link .

Hot this week

Canada: Canada Must Match the Tax Incentives in Trump’s ‘Big Beautiful Bill’

Austria: Trump Is Only Part of the Problem

Nepal: The Battle against American Establishment

Poland: Jędrzej Bielecki: Trump’s Pyrrhic Victory*

Topics

India: Peace Nobel for Trump: It’s Too Long a Stretch

Ecuador: Monsters in Florida

Austria: It’s High Time Europe Lost Patience with Elon Musk

Singapore: The US May Win Some Trade Battles in Southeast Asia but Lose the War

Ethiopia: “Trump Guitars” Made in China: Strumming a Tariff Tune

Egypt: The B-2 Gamble: How Israel Is Rewriting Middle East Power Politics

China: 3 Insights from ‘Trade War Truce’ between US and China

United Kingdom: We’re Becoming Inured to Trump’s Outbursts – But When He Goes Quiet, We Need To Be Worried

Related Articles

Indonesia: US-China: Tariff, Tension, and Truce

China: US Chip Restrictions Backfiring

Thailand: US-China Trade Truce Didn’t Solve Rare Earths Riddle

Taiwan: Taiwan Issue Will Be Harder To Bypass during Future US-China Negotiations

Hong Kong: Amid US Democracy’s Moral Unraveling, Hong Kong’s Role in the Soft Power Struggle