Bond Market

skuta · 12-05-2020, 21:37

Bonds are financial debt instruments companies use like an interest-only loan. When these bonds "mature" in say 7-10 years. The Bond must be repaid in full. Normally new Bonds are created to pay off these mature Bonds, essentially refinancing. Rolling over company debt.The Bond Market is going to be short of the investors required to buy these new Bonds.

So at the moment Bond issuers under lockdown are likely to default because of low or no revenues. Companies won't be able to pay interest or in full when the Bond matures. Bond holders will suffer big losses as a result of this. The big problem here that nobody is talking about is the chain reaction across the entire financial system. Bond issuer (like an airline nobody is interested in because paying customers are not travelling) ---> Bond holder with big losses (like a hedge fund) ---> Bank (Your Bank going under because of huge loans to Bond holders going bad)

Are we facing a bigger cataclysmic event than the 2008 financial meltdown? What's being done about this? Don't mention the govt. loans to business because the same problem applies to these loans as well. If you're closed and can't afford to trade, how on earth can you pay back a loan with no customers or revenues? This is the way it looks to me. I might be just missing something or misinterpreting the whole deal. Any thoughts?

Exile on Spencer St · 13-05-2020, 09:00

I’m no economist but, Skuta, the scenario you paint looks pretty much like what occurred in 2008. The entire stock market and banking gambling industry was built on dodgy loans to people who couldn’t pay their mortgages. Somewhat similar to loans to companies that now have reduced revenues and can’t pay back the loans.
And what happened after 2008?
Who suffered? The banks, the hedge funds, or the general public?
Why do you imagine it will be any different this/next time around?

skuta · 13-05-2020, 09:24

of course the whole greedy financial system is built on lies, deception & confidence tricks. the industry preys on the unwary to extract as much cash as possible. it makes me laugh how bank adverts portray themselves as a caring pal on your side looking to help you all they can. they're not. in it purely for themselves to rip you off as much as possible.

I was trying to understand the size of the real problem headed our way, especially when you realise many bonds are held by pension funds (another huge rip-off), and many folk who rely on their pension will be severely financially traumatised when their pension vanishes because of huge losses sustained by their pension provider.

you're right, the general public are in for an expensive bumpy ride after this virus lie is over.

cashman · 13-05-2020, 11:16

virus lie? my owd mate wouldnt think that he died from it.

skuta · 19-06-2020, 21:35

I'm not suggesting the virus isn't real. Just that from all balanced and reputable sources it seems to me it really does not seem to be as bad as something like flu. There are countries out there with no lock-down doing fine e.g. Sweden.

Maybe your pal had some serious underlying medical condition or some other age related susceptibility whose interaction we are nowhere near to understanding? Looks like they were part of the unlucky 1.2% death rate that has nothing to do with individual chance of dying.

monkey hanger · 20-06-2020, 07:43

Quote:

Originally Posted by skuta

you're right, the general public are in for an expensive bumpy ride after this virus lie is over.

lie, over exaggeration, or complete truth regarding the virus will be used in every part of our lives to give us a bumpy ride. we have seen it already when we go shopping with loads of stuff more expensive than in march.

cashman · 20-06-2020, 11:08

Quote:

Originally Posted by skuta

I'm not suggesting the virus isn't real. Just that from all balanced and reputable sources it seems to me it really does not seem to be as bad as something like flu. There are countries out there with no lock-down doing fine e.g. Sweden.

Maybe your pal had some serious underlying medical condition or some other age related susceptibility whose interaction we are nowhere near to understanding? Looks like they were part of the unlucky 1.2% death rate that has nothing to do with individual chance of dying.

your talking rubbish he had NO underlying condition at all, in fact he was still doing Marathons,