Corporate Bond Risk Surges to Record With Credit Markets in `Crisis Mode'

[Purveyor]

By Abigail Moses

Nov. 20 (Bloomberg) -- The cost of protecting corporate bonds from default surged to records around the world as the prospect of U.S. automakers filing for bankruptcy protection fueled concern of more bank losses and a deeper recession.

“Markets are back in crisis mode,” said Agnes Kitzmueller, a Munich-based credit strategist at UniCredit SpA, Italy’s biggest bank. “There is fear in the market.”

General Motors Corp., Ford Motor Co. and Chrysler LLC executives left Washington empty handed yesterday after two days of pleading with lawmakers for a $25 billion bailout. Credit markets have “significant” liabilities to the automakers, raising the prospect of “continued writedowns,” BNP Paribas SA analysts told investors today.

Credit-default swaps on the Markit CDX North America Investment-Grade index jumped 23 basis points to an all-time high 270, according to broker Phoenix Partners Group at 11:15 a.m. in New York. The Markit iTraxx Crossover Index of 50 European companies with mostly high-risk, high-yield credit ratings climbed 37 basis points to 927, having earlier traded at 933, according to JPMorgan Chase & Co. prices in London.

Stocks slumped worldwide as a Conference Board report of leading economic indicators fell for the third time in four months, signaling a deepening recession. U.K. retail sales dropped for a second month in October as rising unemployment and the financial crisis dissuaded shoppers from spending.

Treasury yields declined to record lows, with two-year notes dropping below 1 percent for the first time, as investors shunned all but the safest assets.

‘Poisonous Cocktail’

Investors face a “poisonous cocktail” of concerns over the collapse in value of mortgage-related assets in the U.S., Jeroen van den Broek, the Amsterdam-based head of credit strategy at ING Groep NV, wrote in a report today. Treasury Secretary Henry Paulson’s decision to abandon plans to buy toxic mortgage assets has driven the price of the securities to record lows, triggering concern of more losses and writedowns at banks.

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BLOOMBERG: http://www.bloomberg.com/apps/news?pid=20601103&sid=a7pvswZOZJ0g&refer=us

[JohnWxy]

1. Recommended. Maybe you should email this to Republicans in Congress - not that it would make any

difference.