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For USTs a downgrade is a meaningless sideshow. For risky assets, such as equities, the mkt perceives the downgrade to be a very meaningful piece of news (or just a final straw, as the case may be). So sell them stocks and buy them bonds.

My friend, if only that were the biggest problem of theirs... Something tells me they got more pressing issues.

Yep, my guess is that the mkt thinks the Fed will do more QE and therefore there's no reason to sell TIPS. I would beg to differ on the margins, so maybe tomorrow it's time to hit the magic button and sell some.

There's a lot of book (and other material) recommendations on this here fine forum...

You can look at the bond indices (e.g. Lehman Agg, now known as the iShares Barclays Agg), as they're total return. All the data is out there and I would imagine Yahoo Finance should have it.

To be honest, I don't know any more. I used to think that it's certain that the EMU sorts itself out somehow. Now I would say the probability of an Italian exit from the EMU and the subsequent devaluation of the new lira is quite significant. I'd say 15% is my probability that the EMU...

Well, DAX is down 20% in 10 sessions, so it's pretty much the same everywhere...

Listen, Daal, I know what you're saying, but if you have heard the Germans today and throughout all this, there's one thing that's clear. They're being dragged willy-nilly to an altar where they will be joined in not so blissful fiscal union with the Italians and other Mediterranean types. Now...

The ECB always uses anonymous modes of communication.

Yep, the only fly in that ointment is that liquidity support for Italy and Spain entails bond purchases to the tune of arnd $1trn. It's hard to see our new German overlords getting excited about that.

No, nothing exists for OATs... There's the CME Sovy futures, but they're really a waste of time.

I thought we were discussing replicating portfolios?

Why don't you read a book about bonds or smth?

Be that as it may, nobody has so far come up with a viable system that is completely free of central planning. This is especially true in the modern world where centrally planned economies of your competitors bestow a whole bunch of advantages on them.

Yeah, but this is the usual ZH bollox... Not telling the whole story.

Hahaha, I don't think you can buy EFSF bonds, but you may be able to eventually. As to CDS, best you can get is probably the SovX index.

Indeed... The SIV they can "implicitly" guaranteed can only be so big. Otherwise, the ratings agencies, who have learned a trick or two about SIVs in 2007/08, will go ballistic.

Sure thing, would be happy to discuss, but a bit later, if OK... A bit of a crazy day here at the moment.

The EFSF can do anything and everything. In theory, it has the ability to resolve all the issues faced by the PIIGS. The problem is its absolutely piddly size and the unwillingness of the AAA members to commit to more.

No problem... FWIW, there's talk (based on some comments by Brian Sack) about the possibility of the Fed changing the maturity composition of its balance sheet (selling shorter-dated USTs to buy longer-dated ones). So the Fed might do a big flattener. This was from a recent WSJ article...