Can You Hear Me Now?
Verizon priced $51 billion worth of bonds at $49 billion.
Technically they sold $49 billion of bonds at $49 billion that then traded to be worth $51 billion. That is a lot of profit to those who got good allocations. That is positive for the market. Some “free money” goes a long way towards building confidence. It has been a choppy couple of months. Long only funds have struggled to show good returns. This should help their performance. Hedge funds will benefit from this as well. All in all, this shows how much “cash on the sidelines” there is. This deal had a very large concession, but got done easily and traded well.
This deal provided a great opportunity for active managers to outperform passive funds.
It also seemed to help the treasury market. Allegedly Verizon had a very large rate lock and unwinding that helped treasuries. It looks like Verizon should have spent less time worrying about rates and more time worrying about how cheap their deal was getting priced at.
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