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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Amy J who wrote (25545)	12/1/2004 2:03:01 PM
From: patron_anejo_por_favor	Respond to of 306849

<<Why would a defaulting US financial system be good for US treasury bonds?>> 2 reasons....it would be a deflationary event, in that bankruptcies are a black hole for liquidity. That would make tend to make debt instruments (treasuries in particular) attractive. Secondly, the US government can always "print more" to meet their obligations (no matter how ridiculous the policy is at the time). So the lowest possible risk of defaulting on a debt obligation rests with the entity with the greatest access to funding. And there would be flows to treasuries from other less secure debt obligations (ie, credit spreads would widen tremendously). It's the "flight to safety" which is often cited as a reason for treasuries rising during financial dislocations......