Monday, 10 March 2008 05:00

The Bust that Broke the Bear's Back?

My ruminations on Bear Stearns look to come into their own...

Just in case you haven't read them:

Although these guys are not in the news today, expect to seem them within a few months... The Riskiest Bank on the Street

And in today's news...

 From CNN:

Shares of Bear Stearns (NYSE:BSC) Cos. tumbled to a 5-year low Monday, weighed by downgrades of Alt-A deals by Moody's Investors Service, as well as a negative comment on brokers in general from Bernstein Research... Earlier, Moody's downgraded the ratings of 163 tranches from 15 deals issued by Bear Stearns ALT-A Trust, with 78 downgraded tranches remaining on review for possible further downgrades. Moody's said the downgrades are based on 'higher-than-anticipated rates of delinquency, foreclosure and [repossessed foreclosures] in the underlying collateral relative to credit enhancement levels.'

From Reuters:

The cost to insure the debt of Bear Stearns Cos (BSC.N: Quote, Profile, Research) surged on Monday and its share and put options were active on concerns that the company may be facing liquidity problems. Alan "Ace" Greenberg, chairman of Bear Stearns' executive committee, said market rumors concerning the Wall Street investment bank's liquidity are "totally ridiculous," CNBC television said. The cost to insure Bear's debt with credit default swaps jumped 150 basis points to around 590 basis points, or $590,000 per year for five years to insure $10 million in debt, said brokers.

"Bear Stearns shares and put options are active on unconfirmed liquidity concerns," said Paul Foster, options strategist at Web information site in Chicago. Investors are aggressively buying puts, which convey the right to sell the stock, Foster said.

Bear Stearns' bonds also weakened to junk levels, and buying interest evaporated amid talk about liquidity problems, a trader said. "There probably isn't even a bid for the bonds right now," the trader said.

Bear Stearns 6.4 percent notes due in 2017 tumbled to 80.8 cents on the dollar, down about 3 cents, pushing yields up by 58 basis points to 602 basis points over Treasuries, according to MarketAxess.

Last modified on Monday, 10 March 2008 05:00