Wall Street Makes Winning Bet On Bonds, but Luck May Turn
Stocks of securities firms have soared 32% since early March, leading the market higher, thanks to upbeat results at some top Wall Street companies. Behind the good news: a burst of gains from heated trading in the bond market.
But with the bond market suddenly struggling, some firms could be caught leaning the wrong way and could suffer heavy losses from all the bonds they hold, according to some analysts. Just as worrisome: indications that some securities firms have been increasing their trading risk and use of borrowed money as they buy up bonds and other interest-rate-related investments, moves that could that haunt them in a serious down market.
"There's a tremendous amount of leverage in the bond market, and it is skewed toward a bet on lower rates," says James Bianco, president of Bianco Research LLC, a Chicago-based firm. "If rates shoot up, you've got a problem."
While brokerage earnings are notoriously volatile, some believe trading has become more aggressive as firms react to the slowdown in their other businesses. That could lead to broader swings in these stocks.
Many brokerage firms have beefed up "proprietary" trading groups (those using the firm's capital). Even more traders on Wall Street deal with their firms' clients but make money on the side by trading, as well, with their firm's money. In the past year, traders bought Treasurys, corporate bonds, derivatives and other investments betting that interest rates would keep falling. Banks also have been piling on bonds. During the past 28 months, banks increased holdings of U.S. government bonds by a whopping 46%, or $355 billion, according to Moody's Investors Service.
As Treasury rates tumbled to 45-year lows over the past year, many of Wall Street's best traders have been rewarded. Lehman Brothers Holdings Inc. saw revenue from principal transactions, or trades done with the firm's own money, more than double to almost $1.3 billion in this quarter, from $627 million in the 2002 second quarter. That is more than 50% of the firm's entire revenue and three times the investment-banking revenue at Lehman, whose stock has jumped 54% since October.
Firms also have been raking in money trading bonds for clients. Bond commissions are thin but firms are more than making up for it in heavy volume, as daily volume in Treasurys soared 40% since the end of last year. Brokerage firms gained about 33% of their second-quarter revenue from bond trading, up from 21% two years ago, according to UBS. In the second quarter, for example, Goldman Sachs Group Inc. whose shares are up about 30% since March, saw revenue from bond, currencies and commodity trading soar 39% to $1.6 billion in the second quarter, 40% of the firm's entire net revenue.
But Treasurys tumbled last week, with 10-year yields climbing to 3.54% from 3.38%. If a bear market has begun, it could cripple some who loaded up on bonds. And while a volatile market creates opportunity for traders who focus on clients, rather than their own bets, even these traders do better when bond prices rise because they often hold bonds as part of their trading activities.
Adding to the risk, primary dealers, or those big firms that deal directly with the Federal Reserve when they sell Treasurys, accumulated a record $640 billion in net borrowings as of late May, more than double the roughly $300 billion of just three years ago, according to Bianco Research.
Consider Lehman. It had a net-assets-to-equity ratio of 17.9 at the end of the second quarter, up from 16.6 at the end of last year's third quarter. For every $1 the firm has, it holds $17.90 in assets, thanks to use of borrowed money. (Securities firms and banks are allowed to leverage themselves by borrowing against equity capital.)
"Our net-leverage ratio continues to be in line with our peer group and well below our maximum target," says a Lehman spokeswoman, who notes the firm has gained market share outside of bonds.
Leverage is at its highest level for securities firms since the fourth quarter of 2001, according to the Securities Industry Association.
But it isn't close to the levels of 1998. Then, securities dealers lost several billion dollars on risky bonds after the near collapse of hedge fund Long-Term Capital Management. Many firms have been reducing leverage outside of bonds, lowering overall leverage. Lehman, for example, had a net leverage ratio of 20.6 at the end of 1998.
Still, David Hendler, an analyst at CreditSights, says many securities firms and banks increased leverage in recent months but reduced it just before posting quarterly results, to avoid unnerving investors.
He says many are using derivatives-contracts whose values are determined by an underlying security or index to increase leverage while reducing the evidence on their balance sheets.
Leverage likely will keep rising if investment-banking and other businesses remain in a slump and firms continue heavy trading.
"Clearly, a higher net-leverage ratio brings with it higher risk," says Glenn Schorr, a UBS analyst. "However, operating conditions have been ideal and taking leverage up to take advantage of moves in the market makes sense right now."
Another measure of Wall Street's trading risk is its "value-at-risk," or how much firms could suffer in trading losses in a single day, according to their internal models. These levels are rising lately.
"Leverage has come down from 1998, but trading risk, particularly in fixed income, has been increasing in recent quarters," says Henry McVey , a Morgan Stanley analyst.
In the second quarter, for instance, Goldman Sachs says it risked as much as $59 million of daily losses, up from just $19 million in the first quarter of last year.
Some fear that, in a vicious bond selloff, some brokerage firms and banks would be hurt more than they have been during the bear market for stocks since 2000.
"Firms feel they can make leveraged bond trades, but it doesn't always work out," says Mr. Bianco, citing heavy losses during 1994's bond bear market.
华尔街公司从债券交易中获益
自3月初以来，证券公司的股价已经上涨了32%，并引领大盘上扬，这要归功于一些顶尖的华尔街公司令人鼓舞的业绩。在这个好消息背后隐藏著这样一个事实：火热的债券市场交易量激增。
但一些分析师认为，随著债券市场突然遭遇困境，一些公司可能陷入歧途并因为他们持有的所有这些债券而遭受重大损失。同样令人担忧的是：有迹象显示，一些证券公司一直在加大交易风险，并用借来的钱购买债券和其他与利率有关的投资工具，此举可能使他们在市场严重下滑时陷入困境。
Bianco Research LLC 的总裁詹姆斯?比安科(James Bianco)说，债券市场有巨大的杠杆作用，它向著认定利率会下降的赌注倾斜。如果利率上升，参与者就会遇到麻烦。
虽然经纪人业务的收益是出了名的不稳定，但一些人认为，随著这些公司对其他业务的下滑做出反应，交易已经变得更加大胆。这可能导致这类股票出现更广泛的波动。
许多经纪公司已经加强了自己的交易队伍（运用公司的资本进行交易）。华尔街有更多的交易员在为公司客户处理业务之余，用公司的资金进行交易以获利。去年，交易员们购买国债、公司债券、金融衍生工具和其他将赌注放在利率会不断下降上的投资工具。银行也一直在增购债券。据穆迪投资服务公司(Moody's Investors Service)说，在过去的28个月中，银行持有的美国政府债券大幅增加了3,550亿美元，增幅为46%。
由于国债利率在过去一年跌至45年低点，许多华尔街最好的交易员获得了回报。雷曼兄弟公司(Lehman Brothers Holdings Inc.)第二季度来自本金交易或用公司自有资金进行交易的收入增长了一倍多，几乎达到13亿美元，上年同期为6.27亿美元。这占公司总收入的50%以上，是其投资银行业务收入的3倍，该公司的股价自去年10月以来已经上涨54%。
这些公司还通过为客户进行债券交易迅速获取收入。债券交易佣金很少，但这些公司通过巨大的交易量足以弥补这一点，因为从去年年底以来，国债的日交易量猛增40%。据瑞士银行(UBS)称，经纪公司第二季度来自债券交易的收入增长了大约33%，较两年前增长了21%。以高盛集团(Goldman Sachs Group Inc.)为例，该公司第二季度来自债券、货币和商品交易的收入增长了39%，至16亿美元，占公司全部净收入的40%。该股自3月份以来已经上涨30%左右。
但是美国国债价格上周下挫，10年期国债的收益率从3.38%攀升至3.54%。如果熊市行情已经开始，就会打击那些大量持有债券的人。而且，虽然一个波动性较大的市场给那些关注客户业务而不是自身投资的交易员创造机会，但即使是这些交易员，也是在债券价格上涨的时候业绩较好，因为他们常常在交易活动中持有部分债券。
据Bianco Research说，截至5月底，一级交易商或出售国债时直接与美国联邦储备委员会(Federal Reserve)交易的那些大公司累计净借款额达到创纪录的6,400亿美元，较3年前的3,000亿美元增加了一倍多，这使风险进一步加大。
就拿雷曼兄弟来说，该公司第二季度末的净资产与股东权益比为17.9倍，高于去年第三季度末的16.6倍。由于使用借款，该公司每拥有1美元，就相应持有17.90美元的资产。（证券公司和银行可以通过股本借款进行杠杆经营。）
雷曼兄弟的发言人说，公司的净杠杆比率仍然与同行保持一致，并远远低于公司的最高目标，她指出，公司提高了债券业务以外的市场占有率。
据美国证券业协会(Securities Industry Association)称，证券公司的杠杆比率处于2001年第四季度以来的最高水平，但尚未接近1998年的水平。当时，在对冲基金长期资本管理公司(Long-Term Capital Management)濒临破产后，证券交易商损失了数十亿美元。许多公司一直在下调整体杠杆比率。例如，雷曼兄弟在1998年年底时的净杠杆比率为20.6。
然而，CreditSights的分析师大卫?亨德勒(David Hendler)说，许多证券公司和银行在最近几个月提高杠杆比率，但是在公布季度业绩前下调这个比率，以免引起投资者不安。
他说，许多公司在削减资产负债表上的杠杆比率的同时，利用金融衍生工具提高实际比率。
如果投资银行及其他业务继续低迷，证券公司继续进行大量交易，杠杆比率可能不断上升。
瑞士银行的分析师格伦?肖尔(Glenn Schorr)说，显然，较高的净杠杆比率使这些公司的风险较高。然而，运营状况一直很理想，眼下提高杠杆比率以利用市场的波动性似乎是有意义的。
衡量华尔街交易风险的另一个标准是风险价值，即根据内部模型计算的公司在一个交易日内可能遭受的交易损失。这个水平最近一直在提高。
摩根士丹利(Morgan Stanley)的分析师亨利?麦克维(Henry McVey)说，杠杆比率自1998年以来一直在下降，但交易风险，尤其是固定收益业务的风险，最近几个季度却一直在上升。
例如，在第二季度，高盛声称每日的损失风险高达5,900万美元，去年第一季度仅为1,900万美元。
有些人担心，在恶性的债券抛售狂潮中，一些经纪公司和银行遭受的损失将超过2000年以来的股市下跌行情对他们的打击。
比安科说，这些公司认为自己可以通过借款进行债券交易，但这并不总是奏效。他指出，这些公司在1994年债市处于熊市期间遭受了重大损失。
