Debt Market Distortions Go Global as Nothing Makes Sense Anymore

Re:Debt Market Distortions Go Global as Nothing Makes Sense ... by bcohn91 on Monday November 16, 2015 @01:38PM (#10576156)

I'm a little confused. Are you saying you can hedge a swap like a Treasury, but can't do the reverse -- hedge a Treasury like a swap? Why would that be the case? Or am I misinterpreting you?

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Re:Debt Market Distortions Go Global as Nothing Makes Sense ... by scarletham on Monday November 16, 2015 @02:01PM (#10576326)

He's saying that if the investor wants a Treasury, the only way you can sell that to him is with a Treasury. If he's open to a swap, you can sell (write) that contract to him and hedge it with either a Treasury or another swap.

The only way to deliver a Treasury is with a Treasury, which you have to track down out of inventory or from another dealer. You can write a swap without having to go through that ordeal. This means lower transaction costs.

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Re:Debt Market Distortions Go Global as Nothing Makes Sense ... by kal31dic on Tuesday November 17, 2015 @01:34AM (#10579501)

Its not true though. You can sell it to him, receive on a 10 year swap and borrow the bond from someone else. Or you can buy futures and borrow the bond. And if you can't manage to borrow the bond, failing for a while to deliver to your customer is hardly the end of the world, last I checked.

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