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There has been a big default. Russia defaulted on 200 billion in debt that
was issued in spring of 98. This kind of debt is the kind that is used in all
kinds of swaps and other arbitrage spreads to gain yield advantages by outfits
like LTCM based on statistical models and the naive assumption that sovereigns
will not default. These securities less than 6 months old are trading at
approx. 7% of par. That means 93% of 200 billion in losses is cascading
through the financial system looking for a final resting place. BofA writes
off 1 bil. and BankersTrust 500 mil and so on. The big shooters have all
hunkered down like in a giant game of dodgeball to the death and as a
consequence liquidity has disappeared. The mainstream press paid
astonishingly little attention to the Russia default but the history books
will mention it prominently.
Bruce Lawrence
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