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Guest The_Oldie

Corporate Bond Risk Surges As Germany's Ikb Reports Subprime-loan Losses

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Guest The_Oldie


July 30 (Bloomberg) -- The risk of owning corporate bonds surged by a record as losses on U.S. subprime mortgages at Germany's IKB Deutsche Industriebank AG triggered concerns of global market contagion.

Contracts on 10 million euros ($13.8 million) of debt included in the iTraxx Crossover Series 7 Index of 50 European companies increased as much as 60,000 euros to 504,000 euros, according to JPMorgan Chase & Co. The CDX North American Investment-Grade Index rose $16,000 to $97,000, Deutsche Bank AG prices show.

Investors are fleeing corporate credit in the fastest selloff in seven years, Barclays Capital said today. The rout that began in mid-June when two Bear Stearns Cos. hedge funds almost collapsed spread worldwide as Blackstone Group LP stepped in last week to support Sydney-based Basis Capital Fund Management Ltd. and ABN Amro Holding NV's co-owned Absolute Capital Group Ltd. froze investor accounts.

`` 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.''

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