http://www.theaustralian.com.au/bus...ush-gathers-pace/story-fn91wd6x-1226221293176 Who ends up paying the bills when it gets FUBAR ?
So what's wrong with your bolded part? I don't see it. Australia is triple A so the bonds issued by the government are essentially risk free (< 0.01). If anything, this should be a worry. Regulatory "burden" which is much needed and they want it gone.
http://www.crikey.com.au/2011/08/26/ratings-agencies-how-toxic-loans-became-a-gleaming-security/ http://thismatter.com/money/bonds/bond-ratings-and-credit-risk.htm Yeah australia is AAA in someones "opinion". "Safe as houses" you could say... pun intended
It's more than simply the opinion of some guys, there's statistics and stuff involved. The AAA rating merely means that there is almost zero probability of default (not actually 0!). Anyway, I thought this article was about corporate bonds so I still don't see why that part of the whole article specifically was bolded :|
I cant believe you think that fishball. I thought you were one of the others. You cannot pick up a paper today without reading of soveriegn risk yet Australia is different because we are triple A? So were a lot of countries not that long ago. I would not trust the ratings further than I cant throw them
Never said that Australia is different. I am one of the most vocal posters on here who think Australia is poised for a massive economic crisis (RE/resources bubble bursting). Just wondering why of all the potential issues involved in issuing corporate bonds, a sentence about a benchmark using 'risk-free' bonds was made bold. By the way, I never said credit rating agencies were good or accurate. I merely said they don't simply make opinions and pass it off as ratings, there's stats involved. The methodology they use is flawed imo but that doesn't change the fact they do use stats. Also to add, some pros/cons for corporate bonds off the top of my head (might be wrong)... Pros: Debt issuance should be cheaper than equity, allows for easier sources of funding (sorely needed, a company my friend works at had to get a syndicated loan for 7 figures and it wasn't cheap), more flexibility in investment options for investors. Cons: Much more regulation required (Enron etc), current system does not cater well for corporate bonds (risk) among others.
Whoopsy someone forgot to tell themselves that [youtube]http://www.youtube.com/watch?v=zIGThxn_eGk[/youtube]
That makes a bit more sense, must have misinterpreted. Thought it was a little out of character for yourself. :S
Actually re-reading my first post I can see why it caused confusion because I mentioned AAA and risk free in the same sentence. My premise for 'risk free' comes from the fact that we all use AUD day to day, so if the government defaults on AU Gov bonds our AUD will be worthless too, not because it's triple A. Oops But yeah, corporate bonds... bleh. Next thing you know we'll have local council bonds like the US.
My point with the bolded part was the Govt backing of Corporate investors with risk free GOVT BONDS , basically the taxpayer will foot the bill should something untoward happen. But that wouldnt happen right ? Nothing could go wrong could it ?
I thought they are merely using the gov bonds as a benchmark/metric for comparison and not actually backing corporate investors/bonds with risk free government bonds. No way the gov would back corporate bonds and I can't see that from the statement in the news article.
So the story go's so far , let's see. Treasurer eyes $1.4 trillion pension pool amid plans to open bond market by: Enda Curran From: The Wall Street Journal December 13, 2011 3:34PM AUSTRALIAN Treasurer Wayne Swan wants to sell government bonds to the man on the street, but will punters Down Under buy? Historically, the bond market in Australia - dominated by bank debt for wholesale buyers with little else on offer - has underwhelmed. Mr Swan wants that to change, with an eye on freeing up access to Australia's pension fund nest eggs not just for government bonds but also corporate debt issuers. For starters, Mr Swan wants to cut red tape to make it easier for bond issuers to tap into retail investors. http://www.theaustralian.com.au/bus...open-bond-market/story-fnay3vxj-1226221012355
