Monday, August 25, 2008

Bond Fundraising Costs Soar

A combination of fears from the financial crisis as it stands and the fact that money supply over the last 4 months has grown at a tepid 2.5% is resulting in the climbing cost to borrow from the bond market.

Many banks and companies are paying more to raise money in the bond markets than at any time since the recession in the early 1990s amid signs that the financial crisis is deepening.

Growing worries about the health of many banks, rising default rates and deteriorating economic conditions across the world are forcing yields up as investors demand higher risk premiums to buy bonds.

Spreads for US investment grade banks and companies rose to the highest level last week since the early 1990s, according to Lehman Brothers.

In Europe and Asia, spreads for many investment grade companies are at 10-year highs, according to Lehman.

Some of those facing the highest spreads are Fannie Mae, Freddie Mac, Citigroup, American Express, AIG and Deutsche Telekom.

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