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Wednesday, July 11, 2007

Bond Risk Soars Most in Three Years on Subprime Debt Downgrades

" Corporate bond risk soared in Europe by the most in at least three years as debt rating downgrades on U.S. subprime securities triggered a worldwide selloff, according to traders of credit-default swaps. "

More importantly are the scope and consequences of this repricing of risk.

" "More pain will come,'' said Willem Sels, head of credit strategy at Dresdner Kleinwort in London. "There are signs its spreading to emerging markets, equities and the yen.'' "

The actual downgrades by Moody's and the pending downgrades by S&P make explicit that the credit quality simply isn't there for these instruments. These downgrades will force liquidations of positions. These liquidations will be the first mark to market some of these instruments have seen and they will be much much lower than the market to model projections currently being used...

Source: Bond Risk Soars Most in Three Years on Subprime Debt Downgrades (http://www.bloomberg.com/apps/news?pid=20601010&sid=annFLZY.nFrY&refer=news)