I previously thought BK talk was silly too.
Now I’m not so certain. I’d still put it into the ‘remote’ category, but the events of the last week have made BK “no longer impossible.”
8% on three year paper means that the bond market sees a lot of risk in there as well. I see BP two year paper now priced in the 93 range, yielding 7.1%, when two year paper from Citi (who everyone knows is a basket case being propped up by government actions) has two year paper at 3.7%. The further out in maturity you go, the lower that BP’s paper is selling. Going out 10 years, I see BP paper trading at 87.
The bond market speaks a lot louder than the stock market, IMO.
My money is on bankruptcy of rat control. The costs will be staggering. I believe the rats will move if bankruptcy seems eminent. The only road block to rat control is the British government.
One should remember that the class A debtor status of corporate bond holders is no longer a given, in spite of the laws. One has only to remember the crime committed by this administration against the corporate bond holders of GM and Chrysler.
True enough, but very shortly, I’m a buyer.
As a very wise man I used to know once said, trade on panic.