What actual international investors actually think about burning bondholders: “There are no guarantees, But odds are intriguing”


From MarketWatch / Wall Street JournalIs Ireland really going bust? Commentary: There’s a lot invested in keeping the euro going:

What are the dangers? There are so many known unknowns, and unknown unknowns, in this situation, that forecasting the future may be a fool’s errand. So, instead, let’s look at this thing from the other way around.

Ten-year Irish bonds are today offering a yield-to-maturity of 9.6%.

Let’s imagine the government can’t escape default, and is forced to renegotiate with creditors down the road.

Let’s say it cuts coupons and principal repayment by 10% each.

In that scenario, your investment return from here still averages 8%.

If the government cuts coupons and principal by 20%, you still end up earning more than 6%.

Indeed the Irish government would have to cut coupons and principal by a third before it brought your total investment return down to just 3.5% a year — or the rate currently offered on 10-year U.S. Treasurys (TNX)  .

There are no guarantees. But the odds are certainly intriguing.

Brett Arends is a senior columnist for MarketWatch and a personal finance columnist for the Wall Street Journal.

Perhaps, unlike the heads of broke bookies such as Ivan Yates, this man is just economically illiterate.

Would you like to know more?

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This entry was posted in Bankers' Bailout, Debt Default/Restructuring, ECB/IMF, Economy, EU, Euro / Sovereign Money, Geopolitics, ireland, Leo Varadkar versus the World and tagged , , , , . Bookmark the permalink.

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