Wednesday, March 28, 2012

A recent... in a popular financial website (that has a decidedly EOT bent) cites a report fulminating about the "insular" nature of European sovereign debt. Specifically, the report makes the claim that 85% of Euro-area sovereign debt is held by Euro-area residents.

I will make the simple observation that EVEN IF this is true, there is no way to verify the associated cash flows and economic benefits from the above positions given the modern tapestry of collateral, securitization, swaps, and other associated derivatives.

In other words, EVEN IF this "85%" percent figure is true (and in my estimation, it is not), the economic benefit of Euro-area bonds is most certainly not and "insular" issue.

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