What does Singapore's Swiber bonds default have in common with the United States' 2009 Subprime crisis? Both had resulted in many over-leveraged retail investors getting their hands severely burnt at supposedly 'safe' fixed income investments.
Personally, I find retail investors' willingness to leverage on any fixed income investments worrying. While developed countries' inflation indexed bonds might truly be (almost) risk-free, other fixed income investments are far from risk-less.
I would like to take this opportunity to clear up some common misconceptions.
(A)
Fact: Bond holders are senior in claims to equity holders, preferential or otherwise.
Resulting misconception: As long as the book value of assets exceed liabilities, I will always be able to get my money back.
First of all, you might not even have claims to all the assets of the firm. The firm might have pledged certain assets as collateral for other borrowings such as bank ......