tag:blogger.com,1999:blog-4102429195693595750.post3074728358469068078..comments2024-03-22T05:15:17.042+02:00Comments on Sudden Debt: Hellasioushttp://www.blogger.com/profile/03564511281240682625noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-4102429195693595750.post-79184819921705406062007-05-08T21:31:00.000+03:002007-05-08T21:31:00.000+03:00well...i am very flattered you did a whole post on...well...i am very flattered you did a whole post on the back of my comment.<BR/><BR/>Yes, the huge increase in liquidity of the cds market over the last ~7-10 years has helped corporates issue debt more easily and cheaply, especially with the advent of CDO's allowing risk to be tranched up and placed with a variety of counterparties that want a certain type of risk profile (for example, risky but high-yielding equity tranches for aggressive hedge funds, "safe" and low yielding AAA tranches for reinsurers, etc etc).<BR/><BR/>Now, as to whether it is a bad thing that the tail (derivatives) wags the dog (bonds) as you mention...is that a bad thing? How many years have government bond futures and swaps been trading, 20 years or so? There is no doubt that the trading volumes in those markets dwarf the underlying bonds, but it seems to have worked just fine over the medium-term, I suspect because it really does allow dispersion of risk.<BR/><BR/>I have no doubt that there are risks being under-priced in the credit markets, and that credit "euphoria" is contributing to a global asset bubble, but as you say, it is more likely a symptom of other things, such as overly loose cenral bank policies and continued government-led bailouts creating moral hazard.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4102429195693595750.post-52082267733217653422007-05-07T22:58:00.000+03:002007-05-07T22:58:00.000+03:00I have always been amazed how the press , even the...I have always been amazed how the press , even the Business press , constantly misinterprets these numbers ...... great post , and thanks to "CDS Trader "Anonymousnoreply@blogger.com