rocky

Fixed Income Pair Trade: Long MLN, Short TLT

AAA insured munis are backed by the same bond insurance companies that are paying 14% to borrow money in the capital markets. I am specifically referring to MBIA. The AAA would appear to be overstated. If MBIA is paying junk bond rates to borrow on a subordinated basis, maybe its claims paying rating should only be A or BBB. The US government has one big advantage over municipal issuers: it can print money. Even the State of California does not have that power.