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This is the first of a series of articles promised to Sean Kidney panelist and Melissa Tupper Communications Director of WWF Forest and Climate Initiative to furnish information on the working of global bond markets and risk from market volatility. It tries to explain briefly how the market behaves and the risks associated that many other reputed publications like the NYT, Bloomberg, Guardian perceive
Sen Levin: Report on Financial Collapse Shows Financial Snake Pit
Panel's Blunt Questions Put Goldman on The Defensive
http://www.guardian.co.uk/business/2011/apr/14/goldman-sachs-full-senate-report
http://www.guardian.co.uk/business/2011/oct/02/underwater-mortgages-america-could-sink-without-trace
This is the first of a series of articles promised to Sean Kidney panelist and Melissa Tupper Communications Director of WWF Forest and Climate Initiative to furnish information on the working of global bond markets and risk from market volatility. It tries to explain briefly how the market behaves and the risks associated that many other reputed publications like the NYT, Bloomberg, Guardian perceive
A bond is a debt instrument between a borrower and an investor. A bond can be issued to finance short term, medium or long term credit needs .The interest rates and yields from bonds usually vary as per market sentiments and the borrower’s reputation. Bond market operations have become volatile during the last decade after the introduction of securitized credit derivatives in the market by Wall Street Banks. A credit derivative (CDO/CDS) is a security whose value is derived from the credit risk underlying a bond. As soon as a bond is issued in the market, there is a risk that (i) the borrower may default on its interest (ii) the borrower may want interest restructuring (iii) the borrower may default on repayment of debt (iv) the borrower may want repayment restructuring (v) the borrower may go bankrupt.
So Bankers write out the various forms of credit default documents possible and issue the synthetic CDO’s in the markets almost as soon as the bonds are issued. The value of the CDO jumps as chances of credit default increases, so two groups of investors are created with diverse interests. Group1 are the bond investors who want the interest and repayment of the bond in an orderly manner. Group 2 are the synthetic CDO investors who bet on default so that they can make high profit on the credit risk derivatives. Here are a few interesting stories on how bond markets are functioning and the role of Wall Street’s Investment Banks in the volatility of bond markets. We will keep on adding more links from reputed publications over the next few weeks to appraise our friends at WWF of the perils of bond markets and the past role of Goldman Sachs and other Wall Street Investment banks in shorting bonds they themselves write.
So Bankers write out the various forms of credit default documents possible and issue the synthetic CDO’s in the markets almost as soon as the bonds are issued. The value of the CDO jumps as chances of credit default increases, so two groups of investors are created with diverse interests. Group1 are the bond investors who want the interest and repayment of the bond in an orderly manner. Group 2 are the synthetic CDO investors who bet on default so that they can make high profit on the credit risk derivatives. Here are a few interesting stories on how bond markets are functioning and the role of Wall Street’s Investment Banks in the volatility of bond markets. We will keep on adding more links from reputed publications over the next few weeks to appraise our friends at WWF of the perils of bond markets and the past role of Goldman Sachs and other Wall Street Investment banks in shorting bonds they themselves write.
Panel's Blunt Questions Put Goldman on The Defensive
http://www.guardian.co.uk/business/2011/apr/14/goldman-sachs-full-senate-report
http://www.guardian.co.uk/business/2011/oct/02/underwater-mortgages-america-could-sink-without-trace
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