why is the spread on bp's notes widening? - 未名空间MITBBS历史存档

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why is the spread on bp's notes widening?

why is the spread on bp's notes widening?# Stock

s*h2010-06-15 07:06

1 楼

after observing the spread of bp's notes vs its stock price for the past few
days, i'm feeling confused as ever by the correlation. so i am hoping maybe
someone can offer some explanation.
when bp's stock price went up, a reflection of market's optimism towards the
company, the yields on all its notes with maturity ranging from 2011 to
2019 all went up as well, which is a indication of pessimissm. when the
stock price went down, so did the yields. take yesterday for example, the
stock price was

c*92010-06-15 07:06

2 楼

because buying stock and bond are two different group of people, they risk
appetite are different. In the long term they should correlate.

s*h2010-06-15 07:06

3 楼

what i didn't know this morning and what i just learned now was that bp's
credit rating got downgraded 6 notches, and the spread on bp's credit
default swap shot up by 75 basis points. interestingly, the stock still went
up. short covering perhaps because the rest of the energy sector went up.
in general, however, the credit market almost always leads the equity market.
i just can't see bp not cutting its dividend at this point. the mgmt will be
foolish to issue any debt at this level.
folks on