Wednesday, September 24, 2008

American Default?

Not likely, but traders have increased their bets to a record high likelihood that the US Treasury is heading towards default.

UPDATE: LIBOR jumps, Bloomberg reports:
The corresponding euro and pound rates also rose, and yields on Treasury bills tumbled as investors fled all but the shortest-maturity government debt.
The market is continually showing signs that it is decreasing its trust in the US's ability to gainfully repay longer dated paper. Banks are hoarding the cash they have, and lending simply is not occurring:
``There's no real term funding markets except for central banks,'' said Meyrick Chapman, a fixed-income strategist in London at UBS AG. ``The Libor is meaningless. It's for unsecured lending and there is no unsecured lending as far as I can see.''
In many ways, current attempts to unlock the markets are not working. Roubini is expecting a mass unwinding in hedge funds and PE as linked to earlier. What is next? Any thoughts?


  1. I'd (and might) bet on Buffet, who disagrees.

  2. Municipalities and their related debt will also begin to fail.


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