Prices jumped on the bid with the bonds trading up to around 65 cents on the dollar in hope that bonds would be settled at maturity.
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In the latter regard, the Boston Globe recently put a spotlight on a major public policy issue that has been ignored by virtually every other newspaper in the United States: the ominous financial, political and strategic implications of Moscow's incipient bid to market bonds on the Eurodollar market .
Also, these bets were not placed in liquid markets that trade all day long at narrow spreads between bid and asked like sovereign bonds or multinational stocks.
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Earlier Tuesday, the Bank of Japan cut its benchmark interest rate to nearly zero and said it would buy government bonds in a bid to weaken the yen and boost the Japanese economy.
Investors have bid up the price of US bonds since the financial crisis, and when bond prices increase their interest rates decrease.
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Prices of junk bonds may have been bid up by investment funds trying to use up large cash balances before the end of the year, rather than by expectations of economic recovery, says Martin Fridson of Merrill Lynch.
Early last week, bid-ask spreads on European government bonds from Spain and Italy touched some of their widest levels of the year, said Tradeweb.
With the exception of the late spring, when bad news from Europe caused a brief sell-off, investors have bid up stocks, high-yield bonds, and most other risk assets.
For example, the bid-ask spread on German 10-year bonds is less than 0.01 percentage point.
One big question also hanging over the market is whether the BOJ can succeed in pushing down yields in its bid to force banks out of the safety of government bonds and back into the business of lending money.
Consob also ruled that Lodi must now make a cash offer (it had wanted to pay in shares and bonds), boosting the chances of a rival bid from ABN Amro , a Dutch bank.
On a brighter note, other peripheral Eurozone debt issues this week went rather well, resulting in a healthy bid-to-cover ratio, with both Spanish and Italian bonds rallying a tad.
Bid-to-cover on the longer-dated four-year bonds was strong too at 2.9.
Bonds issued by the Portuguese government failed to benefit from the safety bid lifting debt prices across the Eurozone.
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Last year, in a bid to generate domestic capital for business activity, the government issued interest-bearing recapitalization bonds to prime the banking system with funds.
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