#Yield Signs

Deep inside a cave some 200 miles east of Cape Town, South Africa, archeologists uncovered ancient markings that represent the earliest evidence of human drawing.

The hashtag precurser – six parallel lines criss-crossed by three diagonals – was etched by a prehistoric artist over 73,000 years ago with a red ochre crayon on a small stone the size of two thumbnails. “I think it’s definitely a symbol and there’s a message there,” said Dr. Christopher Hensilwood, the lead researcher, of the discovery.

Observers of the loan market are also experts at digging for meaning among otherwise inscrutable signs. Of late relative credit spreads are getting focused attention.

As we enter the last weeks of the quarter, how primary issuance is priced gives investors a clue how markets are viewing relative risk. When should the caution light go on? As one top credit manager pointed out, why do syndicated loan arrangers persist in setting second-lien spreads at only a 400 bps premium to first-liens?