MARKET BRIEFS

*what will it take to put a stop to trading CDS?

U.S. government debt's spreads up 60% from end of 2008
The U.S. government's decision to absorb more private-sector debt has driven up the spreads on credit default swaps for U.S. government debt. The protection costs rose to 97 basis points Tuesday, up 60% from the end of last year. "Having effectively guaranteed the short-term markets, that risks shifts to the government," Bank of America Securities-Merrill Lynch analysts, led by Jeffrey Rosenberg, wrote in a note to clients. MarketWatch (10 Mar.)

*well maybe

Credit-derivatives industry poised for major changes
The International Swaps and Derivatives Association is set to introduce changes to the most common type of credit derivatives, credit default swaps. The changes, which include rules to determine payout after a default, will simplify clearing in the U.S., but regulators in Europe will still need to determine clearing rules. "The corporate CDS market is going through one of its most important structural shifts since its inception over a dozen years ago," Morgan Stanley analysts said. Financial Times (10 Mar.)

*rating agencies and Greenspan to blame if you ask me.

Blackstone CEO: As much as 45% of global wealth is gone
Describing the event as "absolutely unprecedented in our lifetime," Stephen Schwarzman, CEO of Blackstone Group, said the credit meltdown has wiped out between 40% and 45% of the world's wealth. He said credit-rating agencies are partly to blame for the crisis. "What's pretty clear is that if you were looking for one culprit out of the many, many, many culprits, you have to point your finger at the rating agencies," Schwarzman said. Reuters (10 Mar.)

*too bad eh?

Investors balk at terms of TALF
Investors, particularly hedge funds, are not comfortable with some of the stipulations for participating in the Term Asset-Backed Loan Facility, saying they give the Federal Reserve and dealers too much power to comb through their books. The program, which is backed by the Fed and the U.S. Treasury, is scheduled to launch next week, but it faces the challenge of getting financial firms to agree to the contract's wording. The Wall Street Journal (subscription required) (10 Mar.)

*seems only fair since shareholders losses have been carrying bondholders for over a year

Concerns mount another rescue would hit banks' bondholders
Bond prices for Citigroup and Bank of America are dropping, as many wonder whether another rescue for the U.S. banking industry would create losses for owners of bank debt. "The bond market is getting more scared every day," said Gary Austin of PDR Advisors. "At some time, the government is going to say, 'Enough is enough. The only way we will give you more cash is if the bondholders have to be hit.'" Bloomberg (11 Mar.)