Corp. bonds a steal?

John Authers of the FT says bonds are priced to break even, even in a 1930's Depression scenario. Citing Deutsche Bank, Authers says high-yield bonds are priced for a 50% default rate, and an "inconceivable" default rate is priced into investment grade bonds.

(Blogger note: OK, OK. I'm biting. Just bought some EMB, the iShares JPMorgan USD Emerging Markets Bond Fund (EMB); and looking at HYG, the iShares iBoxx $ High Yield Corporate Bond Fund.)

Just let the CDS market die

Just let the CDS business die, says John Dizard, writing in the FT

CDS's have been proven useless for supporting capital raising, discovering prices and as a risk-management tool, Dizard says.

"Risk management with CDS was largely about what the bankers called 'reg cap arb' (regulatory capital arbitrage), or making big spreads and bonuses by scamming the regulators whose employers, the taxpayers, now have the bill."

Uncle Sam: Pay me for T-bills!

Interest rates T-bills turned negative on Tuesday.

Here's a FT story.

The FT reports that the implied yield for three-month bills briefly traded at negative 0.01 per cent – the first time that has happened since 1940, citing traders.

(Blogger note: The FT said in Tuesday's print edition that a T-bill issue on Monday sold for a zero-percent rate, first time that happened since 1934. Not sure if that jives with the 1940 date cited above. .. But clearly, we're in a Treasury security "bubble". ... I've been selling TIP and TLT.)

World Bank, IEA, say commodity, oil boom is over

The FT asks if the super-cycle in commodities is over. It says commodities booms historically last about 10 years, the period oil prices have been rising in this latest cycle. (Blogger note: Other commodity prices took off about five years ago.) However, many disagree that the boom is over.

The World Bank thinks the commodities boom has ended.

For the first time in more than 20 years, the U.S. Energy Information Agency projects virtually no growth in U.S. oil consumption through 2030. One reason, though, is assumed higher prices as the economy recovers.

Fannie, Freddie risk pros gave warnings

Congress uncovers internal emails at Freddie and Fannie, and finds that credit risk officers at the firms warned their bosses about subprime:

Washington Post story.

WSJ story.