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Strategies & Market Trends : The coming US dollar crisis
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To: ggersh who wrote (30504)10/4/2010 7:28:25 AM
From: Giordano Bruno  Read Replies (1) of 71463
 
Half of all UK companies are heading for bankruptcy if government bond yields remain at their current levels

Ten-year gilt yields have fallen below 3 per cent, little more than half of the 5.5 per cent high they traded at in July 2007 prior to the financial crisis, in line with a rally in perceived safe haven sovereign debt.

Banks seek smoother bond cycles - Jul-16..Amid mounting talk of a growing bond market bubble, Mr Anand argued if anyone believed such yields were sustainable, then they should also be factoring in the failure of a host of UK companies with large pension scheme liabilities.

“Probably the majority of assets, especially in defined benefit schemes, would be in some form of bonds. The assumptions for returns on these bonds would probably be in the order of 4-5 per cent,” he said.

“If you genuinely believe that bond yields will remain at [current] levels then half of UK companies are bust. As an actuary you are having sleepless nights.”

Mr Anand said the rally in “low-risk” government bonds was partly driven by the “greater fool” theory, in this case a view that central banks would step in as marginal buyers as they conducted a second round of quantitative easing.
.Copyright The Financial Times Limited 2010.
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