Business

While everyone knows about failed rollup Valeant's equity troubles, which have sent its stock crashing to 5 year lows after the biggest one day drop in history earlier this week, a just as interesting development is taking place with its debt, which incidentally at $31 billion (and accumulated during the company's relentless acquisition spree over the past few years) is nearly three times greater than the company's equity capitalization, and is the locus of the biggest problem facing the company currently.

It was just over a year ago when we first observed a troubling development in the global currency funding arena: the global dollar funding shortage had come back after a 7 year hiatus, and "this time it was different."

The reason for this observations was predicated in the collapse of USD basis swaps. This is what HPM said at the time:

It's March Madness in Philly. Thanks to the biggest jump in New Orders since Oct 2005, Philly Fed surged to 15-month highs (jumping from -2.8 to +12.4) crushiung expectations of -1.5. Number of employees improved mopdestly but remains in contraction but "hope" soared to 5 month highs led by exuberant expectations for capex and average workweek. Do you believe in miracles?

In a note that may have been quite prescient, BofA's HY strategist Michael Contopoulos released a note last night titled "Fed acknowledges global growth concerns… again", in which he said that "we have to admit; today’s dovish comments by Yellen took us by surprise" and adds that "although the market’s initial reaction was positive, we think the longer run impact of a very dovish message is bad for risk assets. In fact, we’re a bit amazed by the initial response from high yield today."

• Global Stocks Slip Following Fed’s Cautious Tone (WSJ)
• Oil rallies towards $41, near 2016 high, on producer meeting (Reuters)
• Hamptons luxury home sales soften as Wall Street weakness takes a toll (Reuters)
• Obama picks centrist high court nominee; Republicans unmoved (Reuters)
• Allies See Challenges for Hillary Clinton in a General Election Campaign (WSJ)
• China’s Looming Currency Crisis (WSJ)
• China's biggest metals trader under pressure to cut staff amid reforms (BBG)