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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (22341)	11/23/2004 8:46:51 PM
From: ild	Respond to of 110194

Here're the charts from today's CI: idorfman.com idorfman.com From John Succo minyanville.com on credit spread compression: The primary buyers of credit (those choosing to invest in corporate bonds instead of treasury bonds despite less and less of a spread) over the last several months have been pension funds and insurance companies. We offer that the reason they have been so aggressive in buying credit is because they are simply starving for yield. In other words, it is out of desperation that they have been willing to increase their risk, not out of a perception that that risk is lower. ... The third and perhaps largest buyer of credit spreads is being done by none other than hedge funds. ... The crux of those two points is this: credit spreads are being sold using leverage by hedge funds. This whole process is called compression and we have talked about it before: markets moving in one direction for the technical reason of “starving for yield”. No one sees the unwind coming until it is too late because everyone is instead busy getting into the market.