Fragile finance industry jeopardize US High-Grade Bond Market

August 20, 2008 · By ProfitEdition News Filed Under Finance

Between the continuous concerns regarding more destitution in front, US investment-grade corporate bond market focused continually on financial institutions situation on Tuesday. Along with this, vital investment-grade derivatives index pushed by the swiftly soaring producer prices and weak housing data which indicated that around in a month the market sentiments are on its extensive top.

Fannie Mae, Freddie Mac and Lehman Brothers leading the direction lower as well as debt shield for financials was stressful.

Financial weekly Barron’s saying that there is a chance that U.S. Treasury Department will recapitalize the two mortgage-finance huge Fannie Mae and Freddie Mac have rematerialized the concern over the future of this mortgage gigantic this week. This action will result shareholder empty hand as their holdings will become valueless as well as subordinate debt of these mortgage giants are worried as they could also left with nothing.

According to Phoenix Partners Group in early trading Tuesday cost of protection on the riskier subordinated debt of the government supported enterprises increased to trade at 350 basis points as the result of continuous fall in the confidence in the two agencies. This indicates that investors have to pay more for insuring their debt as compared to late Monday

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