Bond Market Meltdown on Thin Ice
The recent 10.5% bond market unwind took the 10 yr yield from 4.7% to 5.25%... this debt market is on very thin ice....
From Derivatives, Who Knows? and Meet the New Boss, Same as The Old Boss V
"These instruments; attempt to profit on ever narrowing margins; are hybrids which borrow their modeling from outside the financial domain; are not fully stress tested under real market conditions; and as such are unpredictable in their behavior."
A MUST READ!!! From Jubaks latest Steer Clear of the Rotting Bond Market:
"The unstable foundation is built on overseas cash flows and currency manipulation by foreign central banks.
Dry rot threatens the whole system of credit ratings. And some of the banks propping up the market for credit derivatives shake at the slightest touch."
"It's becoming increasingly clear to bond-market professionals that an unfortunately large percentage of their peers didn't have a clue what they were doing as they ramped up to take advantage of the boom in the market for corporate debt."
Re: rating agencies (who are paid by the banks issuing the debt!!) "If you see a similarity with the accounting profession in the era of the Enron scandal, you aren't alone, and the comparison scares some people on Wall Street silly."
"Not only has the debt boom flooded the market with billions, indeed trillions, of new debt, but much of this debt is astoundingly complex.
Many buyers know they don't have the in-house capability to analyze these instruments. They really have no choice but to trust the ratings or stop buying."
From Derivatives, Who Knows? and Meet the New Boss, Same as The Old Boss V
"These instruments; attempt to profit on ever narrowing margins; are hybrids which borrow their modeling from outside the financial domain; are not fully stress tested under real market conditions; and as such are unpredictable in their behavior."
A MUST READ!!! From Jubaks latest Steer Clear of the Rotting Bond Market:
"The unstable foundation is built on overseas cash flows and currency manipulation by foreign central banks.
Dry rot threatens the whole system of credit ratings. And some of the banks propping up the market for credit derivatives shake at the slightest touch."
"It's becoming increasingly clear to bond-market professionals that an unfortunately large percentage of their peers didn't have a clue what they were doing as they ramped up to take advantage of the boom in the market for corporate debt."
Re: rating agencies (who are paid by the banks issuing the debt!!) "If you see a similarity with the accounting profession in the era of the Enron scandal, you aren't alone, and the comparison scares some people on Wall Street silly."
"Not only has the debt boom flooded the market with billions, indeed trillions, of new debt, but much of this debt is astoundingly complex.
Many buyers know they don't have the in-house capability to analyze these instruments. They really have no choice but to trust the ratings or stop buying."
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