1998 all over again?

jungle · July 23rd, 2003, 3:54 pm

i get the impression that "the market" is preeeeetty long mortgages, corporate credit, and emerging market debt. and that it's hedged, at least in part, by being short treasuries. doesn't that leave us pretty vulnerable to a flight to quality resulting from some kind of exogenous shock? seems like a lot of people are chasing yield with little regard for risk.

FDAXHunter · July 23rd, 2003, 3:59 pm

I got Bund calls struck at 130.00... and Note calls struck at 125.00 ... does that answer your question?

kr · July 23rd, 2003, 5:14 pm

yeah but people could push a little harder on their tsy shorts... 10y moving from 3 to 4% isn't a correction yetbut then again maybe f2q doesn't involve UST this time, think about itisn't there a limit to the spread betw Freddie paper and UST, for example? but this shift is more like a slump-to-quality, need not happen rapidly

mencey · July 25th, 2003, 1:08 pm

Well, is another way to play short the IR but having a positive carry, isn't it?