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

To: Real Man who wrote (81652)	10/9/2008 7:04:10 PM
From: GROUND ZERO™	Read Replies (1) \| Respond to of 94695

A rally? Really? Yippee!!! -g- GZ

To: Real Man who wrote (81652)	10/9/2008 7:13:54 PM
From: Paul Kern	Read Replies (1) \| Respond to of 94695

Apparently, LEH CDS settled today, Tomorrow. NEW YORK, Oct 9 (Reuters) - Banks, hedge funds and other sellers of protection on Lehman Brothers' (LEN.N: Quote, Profile, Research, Stock Buzz) (LEHMQ.PK: Quote, Profile, Research, Stock Buzz) debt are facing losses in the area of 90 percent the insurance sold when the value of the failed bank's credit default swaps are settled in an auction on Friday. If sellers of protection outweigh buyers in the auction, as some analysts expect, losses may be even higher. Lehman's bankruptcy filing last month sent its bond values plunging as the majority of the investment banking assets that had supported the debt were purchased by Barclays Bank, leaving debt holders at the abandoned holding company with little to reclaim. The auction to settle credit default swaps protecting the debt will be one of the largest settlements of contracts in the $55 trillion market, with around $400 billion in contract volumes estimated on Lehman's debt. Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac's (FRE.N: Quote, Profile, Research, Stock Buzz) credit default swap settlements on Monday were the largest to date. But unlike swaps on the agency debt, which recovered more than 90 percent of their value, Lehman's protection sellers face the possibility of being virtually wiped out. When a borrower defaults on their debt, sellers of protection pay buyers the full sum insured, and in return receive the defaulted debt or cash equivalents. To determine the cash value of the default swaps, protection buyers choosing to settle the contracts in an auction will deliver the cheapest debt that qualifies in the contracts. The majority of Lehman's bonds are trading in the area of 12 to 13 cents on the dollar, according to MarketAxess, indicating the swaps will only recover in that area.