The bid-ask spread on credit-default swaps in the Markit CDX North American Investment-Grade Index widened to 9.73 basis points yesterday, about 60 percent higher than the week before Lehman filed for bankruptcy and about 169 percent more than two years ago, according to CMA DataVision. The spread soared to a high of 22 basis points on Oct. 13.The index is a benchmark for the cost of protecting bonds against default linked to 125 companies in the U.S. and Canada.
Funny, Larry Summers suggested the worst may be yet to come. What else happened? Another Bloomberg story stated:
CIT Group Inc., the century-old lender to 950,000 businesses, is trading in the bond market as if it may fail.Its credit default swaps soared according to the WSJ:
The cost of insuring CIT bonds through credit-default swaps rose Friday, with CIT five-year CDS quoted at 38 points upfront, up from a Thursday close of 35.6, according to Markit. That means investors looking to protect their $10 million in debt for five years would have to pay $3.8 million up front in addition to an annual $500,000 premium per year.
Is Goldman Sachs up to their usual bets? Does AIG have any insurance on CIT Group debt? Larry Summers is worried about the financial tea leaves.
Is this why the Obama team floated expanding TARP for small businesses, CIT's served market? What's brewing courtesy of the big money boys and their political lackeys?