Are conditions right to explore opportunities in the secondary debt market?
The liquidity crisis triggered by the US sub-prime mortgage market is causing jitters both globally and locally with share and bond markets across the world exhibiting wild volatility. While the final impact of those jitters remains to be seen, factor in the recent interest rate rise in Australia and it is clear that there has been a shift in market conditions. In early July, when Standard & Poor’s and Moody’s downgraded almost US$20 billion of US bonds which were backed by sub-prime mortgages, the US market was the first to feel the impact. One bank announced to investors in two US hedge funds that their investments faced exposure to the downgraded sub-prime assets and, together with a number of private investors, undertook what in effect was a US$3 billion bail out. The US sub-prime mortgage market’s troubles have also echoed globally with a number of European banks halting redemptions from funds with sub-prime mortgage exposures following an inability to price units due to a lack of
