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To: Giordano Bruno who wrote (354901)	1/25/2008 8:49:55 AM
From: ldo79	Respond to of 436258

CDS report: “This is not over. It would be lovely to think it was, but it isn’t” The cost of protecting European corporate debt against default fell on Friday, as dealers mulled over the likelihood that a bail-out of the monolines would succeed. A mood of cautious relief washed over credit derivatives markets, with investors hoping that talks between regulators and banks would lead to a bank-led recapitalisation of the monolines. The market also took heart from reports that Wilbur Ross, the American billionaire, was considering stepping in to buy Ambac, the second-biggest bond insurer. But analysts said a rescue was far from certain, and that the consequences of the monolines collapsing would be dire. “This is not over,” said David Brickman at Lehman Brothers. “It would be lovely to think it was, but it isn’t. There’s a long way to go.” Analysts at Barclays Capital said if the monolines were downgraded further, global banks could suffer losses of up to $143bn. “This is a huge amount, but the assumptions we use are also very aggressive, designed only to show how, taken to its extreme and assuming all monolines get downgraded significantly, bank capital could be influenced.” However, Paul Fenner-Leitão at BarCap said he thought banks and regulators would be forced to prevent such a scenario from occurring. He added: “It may take longer than people expect. You can’t organise a bail-out in the space of a couple of days.” The iTraxx Crossover index of mostly junk-rated corporate debt tightened about 12 basis points to 436bp in morning trade. This means it now costs €436,000 annually to insure €10m of Crossover debt against default over five years. The iTraxx Europe index of 125 investment-grade names tightened to about 70, against a close of 74.5bp on Thursday. tinyurl.com