Little subprime fallout for Asia banks, investors jittery

(Reuters) - Ratings agency Moody's Investors Service said on Friday
that the impact of the subprime meltdown on Asia's lenders
would be limited, with the largest exposure among the biggest
banks through holdings of mortgage-backed securities and
collateralised debt obligations. [ID:nWNA7262]




Standard & Poor's said Japanese banks have about $8 billion
of subprime-related securities, according to the Japanese
Bankers Association, while a small number of financial services
firms in Taiwan have a much smaller combined level of exposure.
[ID:nSPWAcEJwa]


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IKB subprime shockwaves continue to rock Germany

(Reuters) - German commercial property financier Hypo Real Estate struggled to calm jittery investors by insisting it would be unaffected by the U.S. subprime fallout. Its shares still skidded more than 5 percent while Commerzbank -- which owns a property financier -- saw its stock fall 4 percent.




Investor confidence was further dented as it emerged that French insurer Axa had also temporarily closed two subprime funds after sudden losses.


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Bear, Lehman, Merrill, Goldman Traded as Junk, Credit-Default Swaps Show

(Bloomberg) -- On Wall Street, Bear Stearns Cos.,
Lehman Brothers Holdings Inc., Merrill Lynch & Co. and Goldman
Sachs Group Inc., are as good as junk.

Bonds of U.S. investment banks lost about $1.5 billion of
their face value this month as the risk of owning the securities
increased the most since at least October 2004, according to
Merrill indexes. Prices of credit-default swaps based on the
debt imply that their credit ratings are below investment grade,
data compiled by Moody's Investors Service show.


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Treasuries Head for Third Weekly Gain as Investors Avoid Riskier Assets

(Bloomberg) -- Treasuries headed for a third weekly
advance, pushing yields near the lowest since May, as the slump
in U.S. housing prompts investors to avoid riskier assets.

Investors seeking the safety of government debt this week
pushed yields on two-year notes, most sensitive to changing
monetary policy, 70 basis points lower than the Federal Reserve's
target rate. The risk of owning corporate bonds soared to a
record on concern that banks and hedge funds face widening losses
on subprime mortgages and leveraged buyouts.


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Swaption Volatility May Fall as Subprime Fears Ease, RBS Greenwich Says

(Bloomberg) -- Volatility on options for interest-
rate swaps may decline as concern eases that losses in subprime
mortgage loans and other risky debt will spread, according to
RBS Greenwich Capital.

Investors holding mortgage securities often use so-called
swaptions to hedge the adverse moves in interest rates. A swap
in an agreement to exchange fixed for variable-rate payments
over a period of time. Falling rates can trigger increased
mortgage refinancing, cutting returns for bondholders.


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Sell Macquarie Bank Credit-Default Swaps on Earnings, JPMorgan Chase Says

(Bloomberg) -- Investors should sell credit-default
swaps based on bonds of Macquarie Bank Ltd., Australia's largest
securities firm, as increased market volatility is unlikely to
hurt its earnings, according to JPMorgan Chase & Co.

Credit-default swaps based on $10 million of Macquarie's
subordinated debt have risen more than $24,000 in the last three
months to $42,000 today, the highest since Bloomberg started
recording prices in Jan. 2004. The five-year contracts allow
traders to bet on a company's ability to repay its debt. Higher
prices suggest deterioration in the perception of credit quality;
a decrease indicates the opposite.


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U.K. Pound Posts Fifth Weekly Advance Versus Dollar on Interest Rate Views

(Bloomberg) -- The pound posted its longest winning
streak versus the dollar in more than a year on speculation the
Bank of England will keep raising interest rates while the
Federal Reserve stays on hold.

The U.K. currency gained for a fifth week as futures traders
bet the central bank will raise rates a quarter-point and start
pricing in a further move to 6.25 percent by year-end. The pound
touched a 26-year high after Moody's Investors Service cut
ratings on bonds backed by U.S. subprime mortgages and Standard &
Poor's threatened to do the same.


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Treasuries Rise as Retail Sales Data Suggest Slower U.S. Economic Growth

(Bloomberg) -- Treasuries rose the first time in
three days as a government report showed retail sales declined
last month more than economists forecast.

Ten-year note yields fell as the data encouraged traders to
speculate that a slump in the housing market will slow U.S.
economic growth. The yields dropped the most in more than four
months on July 10 as Standard & Poor's and Moody's Investors
Service warned about the credit quality of subprime mortgages.


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Treasuries Rise, Pushing 10-Year Yield to Lowest in Month, on Subprime

(Bloomberg) -- U.S. Treasuries rose after Moody's
Investors Service cut the ratings on $5.2 billion of bonds
backed by subprime mortgages, spurring demand for the safest
assets.

Benchmark 10-year bonds gained for a third day, pushing
yields to the lowest in more than a month. German bunds also
advanced and Japanese government debt rallied the most in 10
months on speculation a deepening U.S. housing slump will slow
the world's biggest economy. Stocks fell in the U.S., Europe and
Asia, and the risk of owning European corporate bonds soared.


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Buy Coles Bonds, Credit-Default Swaps on Wesfarmers Bid, ABN Amro Says

(Bloomberg) -- Investors should buy bonds sold by
Coles Group Ltd. and credit-default swaps based on the securities
to profit from a successful acquisition of the Australian
retailer by Wesfarmers Ltd., according to ABN Amro Holding NV.

Wesfarmers, Australia's biggest home improvement chain, is
likely to buy back Coles' A$400 million ($343 million) of bonds
due in July 2012 should it succeed in buying the Melbourne-based
retailer, said Mark Bayley, director in credit and structuring
at ABN Amro.


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Investors buy protective puts on Lehman bond fund

(Reuters) - Investors often turn to equity puts, giving them the right
to sell a stock at a preset price within a specified time
period, to guard their holdings against downside risk.




The iShares Lehman 20+ Year Treasury Index
, which tracks bonds with longer maturities in the
Treasury market, rose 1.59 percent, or $1.33, to close at
$85.04 on the New York Stock Exchange. The fund is also traded
on the American Stock Exchange.


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Gold Climbs for 3rd Day as Dollar Declines Against the Euro; Silver Rises

(Bloomberg) -- Gold gained for a third consecutive
trading session in London on speculation the dollar's decline
against the euro will increase demand for the precious metal as
an alternative investment. Silver gained.

Bullion, priced in dollars, has risen 3.9 percent this year
while the dollar fell 3.3 percent against the euro. Investors
should buy gold as large speculators may start to build their
holdings, sending prices higher in the next month, UBS AG
London-based analyst John Reade said in an e-mailed report.


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New Zealand Dollar Drops After Moody's Report Says Housing Market to Slow

(Bloomberg) -- New Zealand's dollar dropped after
Moody's Investors Service said the nation's housing market may
slow, eliminating the need for the central bank to raise
interest rates again this year.

There is an ``increased possibility'' of a slowdown in the
country's mortgage market, Moody's said in the report issued
today. New Zealand's currency, known as the kiwi, has gained 11
percent since the start of the year as the central bank
increased the official cash rate three times in a bid to slow
consumer demand, particularly for housing, which it says is
spurring inflation.


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UPDATE 2-Fitch, S&P cut Hilton's rating on acquisition

(Reuters) - Another agency, Moody's Investors Service, said it may cut
Hilton's ratings and will base its decision on the company's
capital structure when the deal closes.




Blackstone agreed on Tuesday to buy Hilton for about $20
billion plus debt, the richest in a series of recent private
equity offers for hotel companies. For details see
[ID:nN03234692].


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Forecasts for `Correction' in U.S. Stocks Reach Highest Since August 1997

(Bloomberg) -- More financial advisers are predicting
a so-called correction in the U.S. stock market than at any other
time in almost a decade, according to Investors Intelligence.

The percentage of newsletter writers who said they expect a
10 percent slide in U.S. stocks during the next 12 months jumped
to 32.6 percent last week, New Rochelle, New York-based Investors
Intelligence said. That's the highest since August 1997 and up
from 25.8 percent a week earlier.


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Treasuries Fall Most in Three Weeks as Private Jobs Report Beats Forecast

(Bloomberg) -- Treasuries fell the most in three
weeks after a private report showed companies in the U.S. added
more jobs last month than economists forecast, reducing the
likelihood of a cut in borrowing costs by the Federal Reserve.

Investors also sold government debt after the U.K. reduced
its terror alert and the U.S. Independence Day holiday passed
without incident, easing demand for the safety of government
debt. A Labor Department report tomorrow may increase
speculation a stronger job market is increasing the risk
inflation will accelerate.


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European Bull Market `Intact,' Deutsche Banks Says, Raising Estimate

(Bloomberg) -- Investors should increase their
holdings of European equities as earnings growth and mergers and
acquisitions continue to support shares, according to Deutsche
Bank AG strategists.

The German bank raised its forecast for the benchmark Dow
Jones Stoxx 600 Index to 410 by the end of this year, up from a
previous estimate of 400 and 4.5 percent higher than yesterday's
close of 392.23.


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Dollar Drops to One-Month Low Against Euro on Outlook for Interest Rates

(Bloomberg) -- The dollar fell to the lowest level in
more than a month against the euro and dropped against the yen on
speculation the Federal Reserve will keep borrowing costs
unchanged while other central banks extend their increases.

Investors also sold the U.S. currency amid concern losses
from the subprime mortgage sector may weigh on the broader
economy, dimming the allure of dollar-denominated assets. Reports
this week are forecast to show U.S. job growth slowed last month
while a gauge of the service sector declined.


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Trichet's `Vigilance' Vow Gives Way to Less Visibility, More Volatility

(Bloomberg) -- In the annals of central-banker
buzzwords, ``strong vigilance'' is probably about to go the way
of ``measured pace.''

Investors and economists who've grown used to European
Central Bank President Jean-Claude Trichet's vow to be on
constant lookout for signs of faster inflation are likely to
find the term disappearing from his pronouncements.


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Albania Gets First Credit Rating From Moody's, Equal to Ukraine, Jamaica

(Bloomberg) -- Albania, the former communist nation
where a quarter of the population lives in poverty, received its
first credit rating, with Moody's Investors Service ranking the
country on a par with Ukraine, Indonesia and Jamaica.

The B1 rating is four steps below the investment-grade level
of Baa3 assigned to Balkan neighbors Croatia and Bulgaria. It
reflects Albania's journey from an ``isolated, administered''
system toward a market economy, New York-based Moody's analyst
Jonathan Schiffer wrote in a report published today.


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