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Post by jeffolie on Aug 21, 2007 10:35:29 GMT -6
Commercial Paper Market Roiled With $550 Billion Due The $1.1 trillion market for commercial paper used to buy assets from mortgages to car loans has seized up just as more than half of that amount comes due in the next 90 days, according to the Federal Reserve. `Uglier and Uglier' ``We're dumping all this collateral into the market and it becomes a death spiral for the assets Instead of commercial paper -- corporate debt that comes due in nine months or less -- money fund managers are running for the safety of government securities. Yields on three-month Treasury bills plummeted Investors are refusing to buy short-term debt backed by any mortgage that isn't guaranteed by government-chartered companies such as Fannie Mae and Freddie Mac Wall Street is in a ``financial panic'' and won't fund any mortgage bonds, even AAA rated bonds backed by prime home loans www.bloomberg.com/apps/news?pid=newsarchive&sid=aP7BZw9X19P8
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Post by jeffolie on Aug 21, 2007 10:48:03 GMT -6
A refusal by investors to roll over ABCP paper for conduits has sparked serious problems at some German banks. However, in addition to the German banks, many other large financial institutions have also been using the ABCP market to fund conduits, research from Citigroup shows. These include Lehman Brothers, Merrill Lynch, Goldman Sachs, Morgan Stanley, Citigroup, JPMorgan, Credit Suisse and Deutsche Bank (see chart). At Lehman Brothers, the value of this outstanding ABCP issuance is larger than its total balance sheet assets while the ratio of issuance to assets is also significant at Merrill Lynch and Goldman Sachs. www.ft.com/cms/s/0/c8079328-4f7e-11dc-b485-0000779fd2ac.html
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Post by unlawflcombatnt on Aug 21, 2007 14:29:56 GMT -6
Commercial Paper Market Roiled With $550 Billion Due The $1.1 trillion market for commercial paper used to buy assets from mortgages to car loans has seized up just as more than half of that amount comes due in the next 90 days, according to the Federal Reserve.... www.bloomberg.com/apps/news?pid=newsarchive&sid=aP7BZw9X19P8The scariest part of this article is that Ottimo has become the latest commercial paper holder to extend maturities on its securities. Ottimo exercised its options to extend maturities (temporarily suspend redemptions) for 30-45 days. This follows the same action by Luminent, American Home Mortgages, and Sentinel. Sentinel has since declared bankruptcy. Thus Sentinel's "extension of maturities" became a complete loss of money for those who held the commercial paper with "extended maturities." To an investor in commercial paper, the term "extension of maturities" = 100% loss of your investment. Anyone who has commercial paper should try to sell it immediately before their investment fund "extends the maturity."
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