THE OIL BUBBLE has rewritten investors’ lists of winners and losers far beyond the confines of commodities. Emerging market sovereign debt issues that were once trading at steep discounts are now at priced well over par and yield less than most Fortune 500 corporate bonds. Thanks to the global glut of petrodollars flooding through the investment-grade fixed income markets, a brand new multi-billion dollar CDO industry has rapidly developed based on piecing together complex synthetic debt structures that claim to offer perhaps a 75 basis point yield pick-up – now seen as generous – as a result of their creative structuring.
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