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Subject:  Re: OT:Madness? Date:  5/30/2020  12:15 PM
Author:  mungofitch Number:  277890 of 279096

I think it's fair to assume that essentially no individual investors have purchased Argentine bonds.
They're all in the hands of various institutions, for various institutional reasons.

* They have a mandate to buy them, e.g. Argentine banks
* They have a mandate to buy them, e.g., they're in some bond index
* A trader thinks the price will rise in time for his (usually not her) year end bonus
* Some fund manager stuffs portfolios with them, since they meet some sort of dumb checklist on meaningless metrics like convexity
* There is a hunt for yield, and some dumber managers think that the extra return is free money rather than a clue about additional risk.
* Managers with perverse incentives making decisions on behalf of the actual investors, like those on commission. See the scene in Big Short at the banquet in Las Vegas.

Basically, I figure it's "the institutional imperative".

The amazing thing is that Argentina issued a 100 year bond in 2017.
I guess it was expected to default at least a half dozen times before maturity, and most of them after the fund manager is dead.
And people bought it.
Or rather, money managers bought it.

As an aside, what is the interest rate on a fixed-rate 30 year mortgage in the US right now?
Would you lend your money for that time frame with no inflation protection? Of course not. Neither would a bank lend their own assets with that kind of risk.
My hunch is that those are sure signs that something unsustainable is probably going on.
Till then, the government mortgage is free money for the middle class.

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