Didi, I have been reading widespread reports, not rumors, that complex strategies on 30yr vs 10yr TBonds have been disastrous and must be unwound, resulting in horrific losses... they are most likely built atop Commodity Futures, which will earn their players a hefty 30:1 levered loss
if Goldman Sachs is involved then they are exposed and will get hurt... very big firm, very deep pockets, but who knows how leveraged they are? .. if like LongTermCapMgmt in 1998, then look out... I havent heard boo about any Federal Reserve action, but it could easily happen... remember former Treasury Secretary Robt Rubin came from Goldman... respected Abby Joseph Cohen is from GSachs also, just an aside
just dunno how deep the GS damage is, or damage with other large Houses
but do know a frequently occuring error is to assume that past stability between 30yr and 10yrTBonds is NO gaurantee for future stability... so many complex large strategies are built atop such unstable foundations
we have some big new phenomena which will rattle the world's markets... not the least is the federal budget surpluses, which will result in payoff of TBonds... the USGovt owns way too much 30yr from the Reagen/Bush 12 years when a cool $2 trillion was tacked on
so the 10yr TBond is the new benchmark, although not a blessed recognized widely understood transition yet
/ Jim Willie |
