Goldman, Merrill Almost `Junk,' Their Own Traders Say

[jk]

Goldman, Merrill Almost `Junk,' Their Own Traders Say (Update2)
By Shannon D. Harrington
March 2 (Bloomberg) -- Goldman Sachs Group Inc., Merrill Lynch & Co. and Morgan Stanley, which earned a record $24.5 billion in 2006, suddenly have become so speculative that their own traders are valuing the three biggest securities firms as barely more creditworthy than junk bonds.
Prices for credit-default swaps linked to the bonds of the New York investment banks this week traded at levels that equate to debt ratings of Baa2, according to Moody's Investors Service. For Goldman, Morgan Stanley and Merrill that's five levels below the actual Aa3 rating on their senior unsecured notes and two steps above non-investment grade, or junk.




http://www.bloomberg.com/apps/news?p...MLk&refer=home

[grapejelly]

Re: Goldman, Merrill Almost `Junk,' Their Own Traders Say

what's going to be really interesting is to watch what happens to ratings on the equity and debt of JPMorganChase et al, the biggest counterparty in these types of CDOs and other derivatives...

[metalman]

Re: Goldman, Merrill Almost `Junk,' Their Own Traders Say

Goldman, Merrill Almost `Junk,' Their Own Traders Say (Update2)
By Shannon D. Harrington
March 2 (Bloomberg) -- Goldman Sachs Group Inc., Merrill Lynch & Co. and Morgan Stanley, which earned a record $24.5 billion in 2006, suddenly have become so speculative that their own traders are valuing the three biggest securities firms as barely more creditworthy than junk bonds.
Prices for credit-default swaps linked to the bonds of the New York investment banks this week traded at levels that equate to debt ratings of Baa2, according to Moody's Investors Service. For Goldman, Morgan Stanley and Merrill that's five levels below the actual Aa3 rating on their senior unsecured notes and two steps above non-investment grade, or junk.




http://www.bloomberg.com/apps/news?p...MLk&refer=home

that's no distinction these days...

"Back in 1980, the debt of slightly less than a third of U.S. industrial corporations tracked by Standard & Poor's was rated junk. By the late 1980s, more than half were, and now 71 percent of the pie fits into that category, a record according to a new S&P report."

http://www.post-gazette.com/pg/07004/751264-28.stm

[jk]

Re: Goldman, Merrill Almost `Junk,' Their Own Traders Say

that's no distinction these days...

"Back in 1980, the debt of slightly less than a third of U.S. industrial corporations tracked by Standard & Poor's was rated junk. By the late 1980s, more than half were, and now 71 percent of the pie fits into that category, a record according to a new S&P report."

http://www.post-gazette.com/pg/07004/751264-28.stm

that's the whole modus operandi of private equity. buy out, leverage, distribute the borrowed money and refloat the company with a junk credit rating.