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Strategies & Market Trends : John Pitera's Market Laboratory
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To: GROUND ZERO™ who wrote (567)3/27/2000 7:10:00 AM
From: John Pitera  Read Replies (2) of 33421
 
if these instruments are no longer insured by the government, then this might
make the bond market more attractive since that would be the only safe haven left..

What I would not want to see, would be further distortion or lack of transparency to the pricing
relationship between the key govt. debt and all the other
debt instruments such as Agency Debt, Muni, Corporate,
Hi Yield "Junk", Foreign govt. etc.

It is a certainty that if the US 30 year and 10 year bonds
are driven to extreme spread levels relative to all the
other above debt instruments it could cause severe
problems with the swaps and derivative books of the Major
Banks, Insurance companies, and other fin. institutions
around the world.

With the Trillions of dollars of derivatives and swaps out
there, erratic and semi-transparent pricing can
precipitate situations like the Blow up of Long Term Capital Management which was responsible for so much of the carnage
in equities in the summer and early fall of 1998.

The Brokers and Investment banks were Particularly
hard hit by the LTCM and Russian Debt default and it is
interesting to see the massive breakouts to new all time highs we have seen very recently in MER, LEH, etc.

John
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