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| These bonds will soar on government takeovers |
Monday, March 09, 2009
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From Zero Hedge:
When the hotdog vendor you buy lunch from talks about the impending nationalization of Citigroup, it is fair to say that nationalization risk is "priced in" Citi's (and all other financials') securities. And while the risk that the government will take over Citi, BofA and the other major banks is palpable, the upside in shorting bank stocks is very limited (BAC can only go down another $3.14 while Citi is a frequent visitor to the 99c club), especially considering the downside risk in the form of a squeeze, which can be easily observed by looking at the market action in the last 30 minutes of trading on Friday (for retail investors who bought into this short covering wave thinking this could be the indicator of a market bottom, our condolences).
Nonetheless, a unique way to play the nationalization threat, with limited downside and potentially substantial upside, does exist in the form of a Parent (HoldCo) - Bank bond basis trade.Visit Zero Hedge...
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