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Corporate Bond Risk Soars as Subprime Mortgage Losses Spread
This is an excerpt from a Bloomberg article written by Shannon D. Harrington and Hamish Risk. For the full article, please visit: [URL]http://www.bloomberg.com/apps/news?pid=20601087&sid=a4oGIr3UgoZE&refer=home[/URL] July 30 (Bloomberg) -- The risk of owning corporate bonds soared to a second straight record after a German bank slashed its profit forecast because of ``massive uncertainty'' in the market for subprime mortgages and credit. Indexes linked to credit-default swaps in Europe and the U.S. rose to the highest since they were created in 2004, indicating perceptions of risk are growing. Default swaps on Dusseldorf-based IKB Deutsche Industriebank AG IKB bonds jumped, trading at six times the prices of a month ago. Goldman Sachs Group Inc. rose to the highest on record. Investors are fleeing corporate credit at the fastest pace in seven years, Barclays Capital said in a report. More than 40 companies have abandoned or reworked loan and bond sales as yield premiums on corporate bonds rose to the highest relative to U.S. Treasuries since 2003. ``It's pure fear,'' said Gary Jenkins, a partner at London- based hedge fund Synapse Investment Management, which manages $650 million of debt assets. ``It's fear of the unknown, fear of hedge funds unwinding, fear of knock-on effects of the subprime meltdown.'' Please use the box on the left to vote for the article