Comments on: Distressed debt datapoint of the day http://blogs.reuters.com/felix-salmon/2009/12/18/distressed-debt-datapoint-of-the-day/ A slice of lime in the soda Wed, 19 Jun 2013 17:28:50 +0000 hourly 1 http://wordpress.org/?v=3.4.2 By: SLJ http://blogs.reuters.com/felix-salmon/2009/12/18/distressed-debt-datapoint-of-the-day/comment-page-1/#comment-10223 SLJ Sun, 20 Dec 2009 19:19:37 +0000 http://blogs.reuters.com/felix-salmon/2009/12/18/distressed-debt-datapoint-of-the-day/#comment-10223 This huge liquidity needs an outlet, be it equity market or the high risk bond market. Remember Alan Greenspan, he had dropped rates so low for so long that he affectively chocked the fixed income market. So to cater for this pent up demand, market came up with rather exotic instruments, bundling all kinds of different risk assets and create a high yield fixed income instrument. We know what that led to. Reasons are different but we again have high liquidity, we are again seeing the same demand for assets, but we are saying not not again, at least not so soon. This is no bubble. This huge liquidity needs an outlet, be it equity market or the high risk bond market.

Remember Alan Greenspan, he had dropped rates so low for so long that he affectively chocked the fixed income market. So to cater for this pent up demand, market came up with rather exotic instruments, bundling all kinds of different risk assets and create a high yield fixed income instrument. We know what that led to.

Reasons are different but we again have high liquidity, we are again seeing the same demand for assets, but we are saying not not again, at least not so soon. This is no bubble.

]]> By: TimC http://blogs.reuters.com/felix-salmon/2009/12/18/distressed-debt-datapoint-of-the-day/comment-page-1/#comment-10210 TimC Sat, 19 Dec 2009 15:51:48 +0000 http://blogs.reuters.com/felix-salmon/2009/12/18/distressed-debt-datapoint-of-the-day/#comment-10210 I don't follow your reasoning why this is not a bubble. In the last credit bubble there was so much demand for bonds that they were able to securitize mortgages with crap underwriting well after the problems with subprime were known. If bonds are trading above their realistic values, that sounds like a bubble to me, whether it is in the primary or secondary market. What difference does it make to the buyer? Whether he's buying at a premium or discount, he or she's going to pay the same price on the primary or secondary market. I don’t follow your reasoning why this is not a bubble. In the last credit bubble there was so much demand for bonds that they were able to securitize mortgages with crap underwriting well after the problems with subprime were known. If bonds are trading above their realistic values, that sounds like a bubble to me, whether it is in the primary or secondary market. What difference does it make to the buyer? Whether he’s buying at a premium or discount, he or she’s going to pay the same price on the primary or secondary market.

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