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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Ajay who wrote (14607)	10/12/1998 9:11:00 PM
From: RockyBalboa	Respond to of 18691

In Europe it is not much better. The 10-year DEM benchmark trading at some 4.25% yield (last week it was at 3,8%), has a severe premium to the 8 and 9-year bonds which trade at 4,7% and 4,8%. You could imagine how the forward curve must look like. Crazy, what. And half the european banks got burned not only on hedge funds but their own portfolio, when matching mortgages and loans with bond repos or short futures. It is the Swap/Bund spread driving them to hell - former 25/30 bp, now 90/110 depending on currency. Noone really considered that spread risk when carrying zillions of nontradeable assets against bund repos. C. C.