The next derivative nuke detonates – CDO’s on Corporate Bonds

This is again one fragment of the $600 tril. of interest rate derivative nukes exploding. This will soon bring new banks into trouble which might have not been engaged to a large extent in mortgage related toxic exposure but it’s only a matter of time that another earthquake shakes the banks or the financial system. One of the riskiest banks in the US remains Citi. We have to see what research will turn out shortly on who is on the ‘hit’-list.

CDO Cuts Show $1 Trillion Corporate-Debt Bets Toxic

Oct. 22 (Bloomberg) — Investors are taking losses of up to 90 percent in the $1.2 trillion market for collateralized debt obligations tied to corporate credit as the failures of Lehman Brothers Holdings Inc. and Icelandic banks send shockwaves through the global financial system.

The losses among banks, insurers and money managers may spark the next round of writedowns on CDOs after $660 billion in subprime-related losses. They may force lenders to post more reserves against losses after governments worldwide announced $3 trillion in financial-industry rescue packages since last month, according to Barclays Capital.


~ by behindthematrix on October 22, 2008.

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