More Bonds & BS (Bear Stearns)

How deep is your love? Bear Stearns (BSC) plans to take out $3.2B in loans to avoid a "fire sale" of one of its hedge funds. LTCM bailout in 1998 was $3.6B, in today's dollar $4.6 Billion.

Well, there you go again... BS saying it has has ample "liquidity" to make a $3.2 B loan and sees "no material impact" on profits from the subprime fallout.

And I thought... the subprime fallout, reverting yield curve & higher rates caused a "material impact" on profits for BS's hedge fund...

causing the crisis and necessitating the loan? What happens if deliquencies and interest rates go higher?

Devil's in the house of the risin' sun... interest payments on about $900 B of the riskiest subprime home loans are due to increase this year and next.

Hope springs eternal... B of A CEO Kenneth Lewis said in an interview earlier this week: that job growth will likely mitigate the effect of rising mortgage payments and defaults on home prices and housing starts.

"The drag stops in the next few months." when asked about his outlook for the housing market. "It's just about to be over. We're seeing the worst of it."

Halt! About face!!! Today, B of A analysts said losses in the U.S. mortgage market may be the "tip of the iceberg" as borrowers fail to keep up with rising payments on billions worth of ARM loans in coming months.

Now wait a minute here, I thought your BOSS Kenny said JOB GROWTH was going to mitigate all that....

It's over... it's over?? Countrywide and IndyMac may suffer more than other finance companies because they hold mortgages themselves.

Neither lender may have set aside enough money to cover losses. But who cares, cause B of A CEO Kenny Lewis sez its almost over, right???

FYI, B of A has a "sell" rating on both lenders... if its over, shouldn't you buy em on the dip?? Come on Kenny, wake up and smell that smell... it ain't Mrs Olson or her coffee...

Chicken in the bread pin, pickin' out dough? Investors have swallowed a record $89B of bonds and $556B of loans this year.

Even bonds such as pay in kind toggle notes, which allow companies to pay interest with more bonds, rather than cash.

Granny, does your dog bite? No, child, no. Since June 1st, the cost to protect $10M in bank loans from default has jumped from $105K to $147K.

As a result, the 10 year swap rate rose to 5.79%, 62 bps higher than the 10 year Treasury yield.

Wonder how many MBS CDO's, toggle notes and LBO's are gonna get "toggled" by that 40% jump in risk premium??

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