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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (34702)	10/28/1998 11:57:00 AM
From: yard_man	Respond to of 132070

CB, My understanding is that there has been a marked increase the aversion of lenders to risk taking, epsecially those that would be the lenders of choice to those who buy the largest postion of corporate bonds on margin. This certainly increases the cost of capital to corporations, but apparently of lot deals are just not getting done. Corporations are deferring borrowing for the time being. Definitely not a good sign. I think some of the market makers in these bonds are getting more risk averse as well. I don't have any way of assessing how serious it is, but if it is half as serious as some say, how can the stock market continue to rise if financial institutions which reap the underwriting income have trouble, those who have the bonds find they are less liquid, etc. Seems like it could have a domino effect of some kind after a fashion, even with lower rates for overnight and a lower discount rate. It's not something I understand very well. That's why I asked MB. This is an area of expertise for him I think.