Best of the Bond Market for April 9th, 2012
Tweet by @DavidSchawel
“Where are the bond bears?” Our Take: As government bond yields rose from 1.99% at the beginning of march to as high as 2.39% on the 22nd of March, the bond market bears were out in force predicting the end of the bond market bull run and the start of the bear market which many have been predicting for a number of years now. As is so often the case when all the news flow is to one side of a trade, the market went in the exact opposite direction as yields on the 10 year have not fallen all the way back to 2.06% today. As David pointed out in his tweet the bond market bears that were out in force when only a week or so ago have now all gone quite.
Ohio’s Debt Chief attends beginner’s course on bonds Our Take: According to the article Ohio’s top debt management executive is a 26 year old who has so little experience in the bond market that he needed to be sent to a beginners course on the topic. Apparently he was also a campaign staffer of Ohio State Treasurer Josh Mandel who appointed him to the position. What we are surprised that the article fails to mention however, and that we find equally surprising, is that Mandel himself is only 33 years old. Will be interesting to see how these youngins do for the state, stay tuned for more.
Article by Expected Loss
Multiple Rating Scales: When A Isn’t A - Our Take: Good article outlining another strange bond market factoid, which is that the same letter rating does not signify the same creditworthiness when looking at different types of debt. This paragraph pretty much sums it up: “During the credit crisis, AAA RMBS and ABS CDO tranches experienced far higher default rates than similarly rated corporate and government securities. Less well known is the fact that municipal bonds have for decades experienced substantially lower default rates than identically rated corporate securities – and that the rating agencies never assumed that a single A-rated issuer ought to carry the same credit risk in both sectors”.