Bond Market Tiers Mean Tears, Stocks On A Tear

Stocks look bullish and bonds bearish. Russ Winter of Winter (Economic and Market) Watch, ML-Implode.com’s Aaron Krowne, and the Wall Street Examiner’s Lee Adler discuss whether this split can continue, and for how long. Russ expounds on the two tier hornet’s nest developing in the bond market, and why it should result in higher yields.

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1 comment for “Bond Market Tiers Mean Tears, Stocks On A Tear

  1. david g
    January 24, 2012 at 4:10 pm

    I listened to WSE on Monday and tracked down the zerohedge article Russ W cited. (http://www.zerohedge.com/news/subordination-101-walkthru-sovereign-bond-markets-post-greek-default-world)

    It strikes me that as sovereign bond market players realize that “local” (subject to national rules such as Greece’s that allow a cram down, i.e., no Collective Action Clauses (CACs) ) sovereign bonds will be junior to those subject to UK rules that have CACs, it may boost the value of those subject to UK rules such that the local issued bonds will fall much further in value.

    In that case, it might signal to the bond market the end of mark-to-model valuations of sovereigns (for which no reserves are required) and expose European and other banks who have not reserved against what used to be AAA rated sovereigns bonds to greater public exposure of their insolvency.

    That could lead to quite an accelerated rush back into the US$, much greater than what we have apparently seen to date.

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