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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: William H Huebl who wrote (42779)	8/7/1999 10:58:00 AM
From: C.K. Houston	Read Replies (2) \| Respond to of 94695

Markets Fear Hedge Fund Collapse May Be Looming Concern is growing in the financial markets that a major hedge fund is in difficulty, prompting fears of a repeat of last year's crisis when the Federal Reserve in the US had to mount a $3.5bn bail-out of Long-Term Capital Management (LTCM) in order to stave off a global financial collapse. The market for swaps, complex interest-rate derivatives which are widely used by hedge funds and the proprietary trading desks of the big investment banks to fund their high-risk trading strategies is, say traders, showing the same signs of distress that was seen after the Russian bond default last August. This has taken the form of a widening of credit spreads - the interest rate differential - indicative of concerns in the market of a major default ... Tiger, the $12bn hedge fund run by New York-based financier Julian Robertson, yesterday dismissed as "rubbish" reports that Goldman Sachs, and Chase had cut its credit lines. Sources close to LTCM have been similarly dismissive of reports that it too was again in difficulty, less than a year after being rescued by a consortium of 13 banks including Barclays, Deutsche and Merrill Lynch." Other accounts have referred to a big US or Swiss bank having taken a big hit. Worries about big trading losses have been exacerbated by a number of large trades in both the equity and swaps market yesterday and on Thursday, indicative of an unwinding of big market positions. Goldman Sachs was reported to have unwound a big swaption (combined swap and option) position, and was also rumoured to have lost pounds 200m on European options. There was talk, too, that the Fed was holding back on raising short-term interest rates to keep one of the big securities houses afloat ...[More] independent.co.uk Cheryl