Monday, October 17, 2011

Our friends the speculators

Wall Street Journal:

MF Global's complex trades involved debt from Portugal, Italy, Spain, Belgium and Ireland, according to the securities filings. The debt has high yields because of the troubles that the countries are facing.  MF Global believed the debt was relatively safe since it matures by the end of next year and may be backed by the European Financial Stability Facility, people familiar with the matter said.  MF Global exited from other higher-yielding trades to free up more capital when regulators required the changes, according to people familiar with the matter.

MF Global is the investment firm of former Goldman Sachs executive and New Jersey governor Jon Corzine.  At least one question: what were the other high-yielding positions that got dumped in the expectation that the Eurozone is underpinning the value of dodgy member country bonds?

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