Friday 28 July 2017

Bonds = bondage

•Like many others, I'm incredulous at the actions of our supine Government in paying over the $1bn Anglo bond.

However, one aspect of this puzzles me. Assume we want to remain the good kids in class by not defaulting on the bond, is there not an argument for clawing back the interest payments at least? The bondholders bought into an instrument with interest payments predicated on the credit quality of Anglo, a private bank, that would have had a rating significantly inferior to that of the ECB.

Given this instrument is now guaranteed for payment by a Triple A institution can we not at least claw back the interest differential reflecting the spread between Anglo and the ECB?

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