If the BPC is correct in their numbers, it is unlikely that the U.S. government would default on interest payments to investors.
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It is accused probably wrongly of hinting that access to this money would be easier if Ecuador were to default on interest payments to private bondholders.
The decision by the Fed to offer emergency liquidity to Bear Stearns and to facilitate its acquisition by JPMorgan Chase had less to do with the size of Bear's balance-sheet than with its central role in markets for credit-default and interest-rate swaps.
They have stayed strong since Russia's default, allowing interest rates to be slashed this year.
In the meantime, threatening default on the interest payment is an important club Clearwire has to swing at Sprint.
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So we are left with President Obama threatening to default on national debt interest, Social Security benefits, and paychecks for troops and their families if Congressional Republicans do not go along with his demand for trillions more in additional national debt with no spending controls, even though there is plenty of money in incoming tax revenues to pay all of these most urgent obligations.
Given the currently very low short term interest rates (and assuming that the effect would be the same) that would mean that a default on Aug 2 could double short term interest rates.
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Have a default on the term and the interest, not on the capital.
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Credit derivatives have made it easier to separate the credit risk (the danger of default) of bonds from the interest rate risk.
On Tuesday June 1st, Argentina unveiled an improved offer to its private bondholders worth about 25 cents on the dollar which acknowledged its creditors' claims to interest unpaid since its default.
To reduce interest-rate and default risk, Ms. Benz suggests sticking with intermediate-term muni-bond funds with a high percentage of their holdings in general-obligation bonds, which are repaid with tax revenue.
Issuers and bond underwriters, as well as many bondholders want to limit the calling of a default to a failure to make interest or principal payments to bondholders when they are due.
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The German fear was that, without it, every euro member would have an incentive to run a big deficit, since the cost in higher interest rates and greater default risk would be shared collectively.
All cleared OTC derivatives will be available including interest rate swaps, credit default swaps, energy swaps, non-deliverable forwards and equity swaps.
Other government policies that have distorted financial markets, thereby undermining the EMH, include shielding credit-rating agencies from lawsuits, government-sanctioned fair-value accounting rules, enforcing credit-default swaps where there is no insurable interest, mispriced deposit insurance, government-sponsored enterprises, and the over-promotion of home ownership.
But a unit of insurer XL Capital, which held some of ESP's junior notes, pointed to a different section of the contract, claiming that in the event of default all note holders would continue getting interest payments before dishing out any principal to BNP Paribas.
We are working with customers because it is meant to bring a lot more transparency, a lot more reporting, much more in market data flows, a lot more storage of trading records for longer and it brings into its orbit a lot of esoteric instruments like interest rate swamps, credit default swaps and collateralized debt obligations.
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So we really are into triple digit interest rates just to cover the default rate alone.
Because they have a higher risk of default, struggling companies must pay a higher interest rate to borrow money.
The kicker is that a confession of judgment typically includes a paragraph that introduces an escalated interest rate from the date of default.
They argue that such a rash move will cause the U.S. to default on outstanding debt obligations, thereby sending interest rates sharply higher across the board.
Fears of a world recession following Russia's default last autumn prompted the Fed to cut interest rates three times, by a total of three-quarters of a percentage point.
Although the investments resembled bonds, paying buyers a fixed interest rate for taking on the default risk of corporate debt, the products invested in synthetic collateralized debt obligations held by Lehman.
The message was that they would be purposefully limited in aim, and that the core of any programme would be a debtor-led partial default - that is, the suspension of interest payments on the remaining debt and a repudiation of the terms of both Troika-brokered bailouts.
What really matters is whether the interest margin properly reflects the risk of default.
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In some cases, the interest rate can be higher than the default rate on other credit cards.
This sets off a death spiral of falling GDP, rising unemployment, and rising interest rates, which eventually leads to default.
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Historically, the risk of default adds about 0.25% to the interest rate.
The simultaneous contracts could be arranged to replicate any agreed interest rate while providing legal protection against default on one side and loan sharking on the other.
Bonds that are yielding 7% to 9% strong returns amid today's low interest rates reflect very high default and delinquency expectations, and the actual outcome may not be as bad, he said.
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