Exact(4)
What went wrong was the firm's risk-management model which is similar to those used by the best and brightest banks.Until the markets fled from risky investments into safe Treasuries during August, LTCM reckoned its portfolio met international capital-adequacy standards.
These investors were also suckered by promises of a higher income than could be obtained on safe Treasuries or possible CDs being issued by mainland commercial banks.
Investors bid up the value of Fannie Mae and Freddie Mac securities, reducing the bonds' yield premium over safe Treasuries.
Among them are the performance of cyclical sectors of the economy versus defensive ones, and the so-called junk spread — the difference in yields between risky high-yield bonds and safe Treasuries.
Similar(56)
Once investors wise up, he says, they'll crowd into nice safe Treasurys, bringing rates down.
The gist of Moini's thinking: Investors have fled junk bonds for safe Treasurys, forcing mutual funds and hedge funds to dump holdings to meet redemptions.
This appears to apply to bonds as well as stocks, he said, and might explain why the spread in yields between ultra-safe Treasuries and riskier corporate debt has narrowed this year, as investors have started to gravitate toward cheaper and potentially more rewarding securities.
Lately, investors seem to have preferred safer Treasuries to riskier corporate bonds.
Eric Viloria, the senior currency strategist for Forex.com, said speculation was mounting that Greece might exit the euro zone, and that accounted for the decline in equities and a shift to safer treasuries.
That's great for VZ but it won't be so good for people holding 5% and lower corporate bonds as "safer" Treasuries begin to rise to match the yields.
In return they get ultra-safe treasury bills.
Write better and faster with AI suggestions while staying true to your unique style.
Since I tried Ludwig back in 2017, I have been constantly using it in both editing and translation. Ever since, I suggest it to my translators at ProSciEditing.

Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com