IG bonds fail to reflect high-dollar-price risk, says Morgan Stanley

The average price of a US investment grade corporate bond is now near its all time high, according to research by Morgan Stanley

Comment by: Anonymous. Posted 12 years ago [2011-11-09 02:17:16]

That's interesting, if accurately analyzed. An idea comes from this finding. One can decompose a premium bond into a par bond and an annuity - both with the credit risk of the issuer. Perhaps there should be a CDS product that emulates an annuity just as the standard CDS replicates a par bond. This may seem a bit far-fetched, but it could be useful. It strikes me as more compelling than a recovery swap.