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Bonds, ‘haircuts,’ savers and their shirts FEATURE 12/03/2010

Friday, December 3, 2010

Bonds, ‘haircuts,’ savers and their shirts

FEATURE

12/03/2010
PARIS — The eurozone debt crisis is being played out through the sovereign bond market, an enormous investment sector funded heavily with the savings of ordinary people who may not realize they are financing governments.

The eurozone government bond market has been showing signs of rising tension since at least last year when Greece slid toward the rescue lifeboat.

The latest violent twists have been driven essentially by a determination mainly from Germany that investors who buy eurozone government debt must share the costs of bailouts.

They must no longer count on state rescues ensuring they do not lose their shirts.

This change in the rules, made official on Sunday, has heightened long-running concerns that some of the countries with huge public finance problems might eventually be driven to restructure their debt.

At Pimco investment fund, chief executive Mohamed El-Erian, said: “My concern is that indecisive management of problems in Greece and Ireland might lead investors to sell sovereign bonds issued by peripheral (eurozone) states as a preventive measure.”.... MORE

SourceThe Daily Tribune

URL: http://www.tribuneonline.org/commentary/20101203com7.html

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