bearfund

Are We Facing a New Wave of Sovereign Bond Defaults?

Makes no difference what you call it; default, devaluation, manipulation. The bottom line is that the investor gets less than he should. Governments are comprised of humans and therefore have human foibles. Humans will with very few exceptions always succumb to the temptation to steal if they know they will not be punished for it. And inflation-indexed bonds are nothing more than the honour system writ large. I'd never dream of buying an indexed sovereign bond; it's already practically impossible to get anything out of a defaulted sovereign obligation, devaluation is always a risk, and when you add in manipulation that's three strikes. If a sovereign wanted to allow an independent international entity to measure its inflation and index to that, I might think about it. But in truth all sovereign debt is underpriced because the risk of default and devaluation are always much higher than the market assumes. I'd much rather buy well-secured senior debt of major corporations; if they default, I get an interest in something tangible that has real value. Strangely, they yield more, too. If a sovereign defaults, devalues, or manipulates, I get the shaft. I don't like getting the shaft. Just say no to sovereign debt.