Debt Waves

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It doesn't take much of an observer to note that debt markets are all aflutter. Last Monday thrashed treasuries, one assumes on increased investor confidence, and woe to the option trader that was long puts on Lehman (for instance, it being up $5.50 at the moment) this week, betting that it was next in line for a crisis of confidence. "Damn you Paulson, damn you and your Treasury Securities Lending Facility," one trader could be heard cursing today. Ironic, that, given that the TSLF seems to be experiencing softer demand now. Sour hopes that the ripo market might collapse on some less than careful investment banks have, it would seem, soured. A second trader was heard to berate the first with a "It's not the TSLF, you ass, its the damn Primary Dealer Credit Facility that's saving their bacon. Slap my ass and call me Linda. I'm going to have to cancel my trip to the Vanderbilt Spring Festival now." True, the PDCF had something like $40 billion in outstanding, overnight loans last I checked. Not bad for a vehicle that was just invented.
Watching Bear Stearns trade at $10.80 is somewhat amusing. Almost as entertaining as a 330 point gain on the Dow.
In this environment, you have to love market inventions that allow you to make pure bets on volatility. Nay? (Or I suppose Lehman puts could just look that much cheaper right now).

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