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10-13-2010, 04:29 AM
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Originally Posted by Tommy Hawk View Post
Ummm, yeah, the price will be much lower than the sum of all the payments. Think Mortgage. And if there is a risk of default on the bonds or a downgrade because the Yotes leaves, the price of those bonds are going to drop like the Cubs in September. People will be begging to get rid of them.
I live in japan, my mortgage rate is less than 1%, over a 30-year period, the total amount of interest is surprisingly small. The US yield curve looks pretty similar to japan's in the front end.

Having said that, I just looked up the bonds and did he math: it would appear that the bulk of the debt is maturing way out the curve where indeed rates are still (relatively) high. There are 45.73mm Series A bonds left to be repaid (current mkt value somewhere 'round 50mm bucks) and 96.37mm of the Series B (mk value 'round 106mm). So a total of 156mm bucks is the market value of the debt (compared with 273.5mm still owed in principal and interest through July 1st 2033 (more than half payable on that date actually)

Still, I'd reckon these bonds are held by retail or small institutions mostly so wud still be next to impossible to get all the bonds back. But the point is conceded: there ARE significant savings in accounting if monies are in hand now.

Somehow they're rated Aa2/AA+ - I'd think that means there is support to pay regardless of yotes, no?

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