Market panic after Bear Stearns reports
Market panic after Bear Stearns reports
By Ambrose Evans-Pritchard
Last Updated: 6:40am GMT 11/03/2008
Panic swept the credit markets on reports of an insolvency crunch at both the US investment bank Bear Stearns and the mortgage giant Fannie Mae, triggering a dramatic surge in default insurance and rumours of yet another emergency rate cut by the US Federal Reserve.
Financial shares plummeted on Wall Street in another day of wild trading as the markets began to fear that the $200bn (£100bn) life-line pledged by the Fed last Friday would not be enough to halt a vicious downward spiral.
The Dow Jones index fell 153.54 to close at 11,740.15, breaking through the crucial support line of its January lows.
Credit default swaps (CDS) measuring bankruptcy risk on Bear Stearns debt rocketed from 246 points to 792 on fears that it had been unable to raise capital to cover mortgage losses and was preparing to invoke Chapter 11 bankruptcy protection.
The company denied the reports, insisting that it had $8bn of ready credit lines and enough funds to meet its debt obligations for the next year without having to sell assets or take out fresh debt. "There is no truth to the liquidity rumours," said a spokesman.
The bank's share price ended down 11pc at $62.30.
Lehman Brothers, the biggest mortgage underwriter, was also mauled on leaked reports that it planned to slash its worldwide workforce by 5pc. Lehman CDS contracts leaped 60 points to 395.
Almost every indicator of credit stress was flashing warning signals. The CDX index measuring default risk on US investment grade bonds rose to 190 and the iTraxxx Europe touched 150.
Bank of America said the Fed would have to cut rates to 1.5pc by the middle of the year. The futures markets have begun to price in the serious possibility of a 100 basis point drop next week.
Goldman Sachs said the Fed chairman, Ben Bernanke, might push through an emergency cut even sooner.
http://tinyurl.com/23s8a4
By Ambrose Evans-Pritchard
Last Updated: 6:40am GMT 11/03/2008
Panic swept the credit markets on reports of an insolvency crunch at both the US investment bank Bear Stearns and the mortgage giant Fannie Mae, triggering a dramatic surge in default insurance and rumours of yet another emergency rate cut by the US Federal Reserve.
Financial shares plummeted on Wall Street in another day of wild trading as the markets began to fear that the $200bn (£100bn) life-line pledged by the Fed last Friday would not be enough to halt a vicious downward spiral.
The Dow Jones index fell 153.54 to close at 11,740.15, breaking through the crucial support line of its January lows.
Credit default swaps (CDS) measuring bankruptcy risk on Bear Stearns debt rocketed from 246 points to 792 on fears that it had been unable to raise capital to cover mortgage losses and was preparing to invoke Chapter 11 bankruptcy protection.
The company denied the reports, insisting that it had $8bn of ready credit lines and enough funds to meet its debt obligations for the next year without having to sell assets or take out fresh debt. "There is no truth to the liquidity rumours," said a spokesman.
The bank's share price ended down 11pc at $62.30.
Lehman Brothers, the biggest mortgage underwriter, was also mauled on leaked reports that it planned to slash its worldwide workforce by 5pc. Lehman CDS contracts leaped 60 points to 395.
Almost every indicator of credit stress was flashing warning signals. The CDX index measuring default risk on US investment grade bonds rose to 190 and the iTraxxx Europe touched 150.
Bank of America said the Fed would have to cut rates to 1.5pc by the middle of the year. The futures markets have begun to price in the serious possibility of a 100 basis point drop next week.
Goldman Sachs said the Fed chairman, Ben Bernanke, might push through an emergency cut even sooner.
http://tinyurl.com/23s8a4
bin66 - 13. Mrz, 00:53
