Registered: Jan 2009
08-16-10 06:17 PM
Quote from The Big D:
Zero of course, but you get to skip the brutal interest rate risk.
I am not sure I understand... What brutal interest rate risk? If I don't like the exposure to rates, I'll sell some 3y USTs at 77bps. However, at this particular juncture, I like interest rate risk. That's the whole point of the "duration grab" that's been happening recently. Whether that's right or wrong, sensible or stupid, I wouldn't want to be a judge of that. Let me just offer you a data point (and, again, I apologize for beating a dead horse), similarly-rated 3y JPY corps are trading at 34bps (from what I can tell, even though I am hardly a credit expert). How do you like 'em apples? So if you believe that we're all turning Japanese, you got some nice upside in buying that IBM 3y at 1%.
EDIT: And let me add smth else... Depending on how much of IBM's income comes from overseas and how bearish you are on the state of US finances, it's not totally silly that being long 3y IBM vs short 3y UST at 23bps is a nice credit trade in and of itself. And I am mostly serious.