2T of assets coming for sale ...

One question: If you were a money manager, would you be holding 30 yr t-bonds yielding 3.92% or would you be buying AAA quality assets liquidating at 8-10%+ yields with all hands and fists?

Hell 10yr GE AAA bonds are already at 6%+, almost 300bp above treasuries...

This next decade will have outsized returns for fixed income managers... All with LEH and AIG to thank.

 

Of course, you could have said the same thing about people buying AAA of LEH right?

 

There is a reason those GE bonds are where they are.

 

Credit ratings are meaningless, you have to do your own dd. Screw the cr companies. Pump and dump idiots.

 

Exactly. TRUTH is good quality paper is yielding no where near the yields the OP implies.

 

My argument is not hinged on GE (does it really have enough exposure to have AAA threatened??), it is hinged on not enough capital being out there to soak up forced sale of trillions of assets.

Simultaneous closing of credit default swap exposure in the many more trillions notional exposure (AIG must be much bigger than BSC' CDS positions) will likely blow out credit spreads as well.

I am talking about FOR SURE good quality AAA getting blown to 300-500bp+ over treasuries as merely a matter of money flow dynamics (too few buyers/money for too many assets)...