Thursday, 12 March 2009

A recent trade explained

Why did I sell short dated Wells Fargo bonds at a small loss recently? Because as Bloomberg reveals today, Banks’ Bondholders May Be Next to Share Bailout Pain. Do I think that senior debt holders will take a haircut soon? Probably not. But probably not wasn't good enough, especially when Geithner can turn on a pin. If investors stay well away from bank debt of any kind until the dust has cleared, I wouldn't blame them. Of course, if they do that, then banks' funding problems will only get worse...

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