Institutional bond traders are pretty sophisticated. They're aware of all the possibilities you mentioned, and pricing the bonds low anyway.

▲

dofm an hour ago | parent [-]

> Institutional bond traders are pretty sophisticated.

I am old enough to remember Long Term Capital Management.

▲

DennisP 40 minutes ago | parent [-]

I'm old enough to remember they weren't just buying and selling corporate bonds like most of the bond market. They were a hedge fund that used massive leverage to exploit tiny arbitrage opportunities between correlated securities.

There may be important factors that the bond market isn't aware of, just like most of them didn't know about the problems with mortgage-backed securities in 2008. But anything you and I are aware of, they probably are too.

	▲	dofm 8 minutes ago \| parent [-]
		> But anything you and I are aware of, they probably are too. This is something that seems like it should be true but the subprime crisis (which didn't at all come out of the blue — anyone with any instinct at all should have understood when they first saw someone get given insane mortgages) argues against.