ACA Capital shares could fall on subprime: Barron's

(Reuters) - Should the U.S. subprime troubles prove to be systemic across different geographies, then not only would shares be hammered, but the company could be toast, Barron's said.




If ACA buckles under, Wall Street firms whose securities the company insured would also be hurt. The $61 billion of ACA's insured exposure would come cascading back to balance sheets of the likes of Bear Stearns , Merrill Lynch , Lehman Brothers , and Citigroup along with some 25 other Wall Street counterparties, Barron's said.


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TREASURIES-Bonds rally on stock rout, subprime fears

(Reuters) - NEW YORK, Aug 3 - The U.S. Treasury debt market
rallied on Friday with benchmark 10-year yields falling to
their lowest levels since May, as subprime fears drove
investors from stocks into bonds and other low-risk assets.




Safety bids for Treasuries and the stock sell-off
intensified after a top executive at Bear Stearns, whose
subprime hedge funds racked up heavy losses, said fixed-income
market conditions were at their worst in 22 years.


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U.S. Stocks Retreat on Credit-Market Woes; Bear Stearns, Oil Shares Drop

(Bloomberg) -- Stocks tumbled on evidence losses in
the mortgage market may slow the economy and reduce bank profits,
sending the Standard & Poor's 500 Index to its worst three-week
retreat since 2003.

Bear Stearns Cos., the manager of two hedge funds that
collapsed last month, helped carry financial shares to their
biggest decline in five years after S&P cut the company's credit
outlook. Energy shares fell to the lowest since May, led by Exxon
Mobil Corp. and Chevron Corp., on speculation weaker job growth
and falling oil prices will hurt earnings.


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Bear Stearns says weathering "extreme" credit storm

(Reuters) - Bear Stearns' chief financial officer said the shockwaves hitting lending markets, triggered by rising mortgage losses, were as bad as crises such as the Internet bubble bursting in 2001 or the 1998 collapse of hedge fund Long-Term Capital Management.




"These times are pretty significant in the fixed-income market," CFO Sam Molinaro said on a conference call with analysts. "It's as been as bad as I've seen it in 22 years. The fixed-income market environment we've seen in the last eight weeks has been pretty extreme."


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US STOCKS-S&P drops 1 percent as Bear Stearns sinks

(Reuters) - NEW YORK, Aug 3 - U S. stocks dropped on Friday,
with the S&P 500 losing more than 1 percent, after Standard &
Poor's cut Bear Stearns Cos. Inc.'s rating outlook,
dragging down shares of the investment bank and other
financial-sector stocks.




The Dow Jones industrial average was down 118.52
points, or 0.88 percent, at 13,344.81. The Standard & Poor's
500 Index was down 14.72 points, or 1.00 percent, at
1,457.48. The Nasdaq Composite Index was down 21.67
points, or 0.84 percent, at 2,554.31.


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UPDATE 3-S&P changes Bear outlook to negative; shares fall

(Reuters) - NEW YORK, Aug 3 - Standard & Poor's on Friday
changed its rating outlook on Bear Stearns Cos. to negative
from stable, indicating a greater chance of a downgrade over
the next two years, as it warned of problems that could hurt
the firm's performance "for an extended period."




S&P said issues include problems at some of Bear Stearns'
managed hedge funds.


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Mortgage fallout weighs on Wall Street

(Reuters) - Standard & Poor's said it changed its ratings outlook on Bear Stearns, the biggest U.S. underwriter of mortgage bonds, to "negative" from "stable," indicating there is a better chance of a downgrade over the next two years.




"People are very concerned. They do not know how deep these loan problems are and how it will affect the economy," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York.


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UPDATE 1-Bear Stearns halts redemptions in third hedge fund

(Reuters) - Bear Stearns' $850 million Asset-Backed Securities
Fund experienced declines in July, prompting some investors to
seek redemption of their investments. The investment bank,
however, believes the assets in the fund -- tied to Alt-A and
prime mortgages -- are worth more than what current market
conditions will allow.




Through the end of June, the fund was up about 5 percent.
But mortgage investments have taken a beating this month and
most of the year amid a rising wave of delinquencies and
defaults on subprime mortgages, or loans made to people with
weak credit.


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AAA CDO, Subprime-Bond Credit Rating `Sins' Not Same, Bear Stearns Says

(Bloomberg) -- Investors fleeing even top-rated
subprime-mortgage securities are wrong to worry they may
default, according to a Bear Stearns Cos. analyst.

Even if they're right to feel ratings firms mistakenly
provided AAA assessments to some bonds from collateralized debt
obligations that will lose principal, the mortgage-bond CDO
securities are ``more fragile'' than the AAA pieces of subprime-
mortgage deals, Gyan Sinha wrote in a report yesterday. The
securities also have more ``cushion'' against likely losses than
AAA bonds backed by home equity loans, he said.


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Old Dominion, Saia fall on Bear Stearns downgrade

(Reuters) - The soft market has hit prices. Last week, LTL operator Con-way Inc. Chief Executive Doug Stotlar told Reuters that pricing has now bottomed out and should not worsen further in 2007.




But concerns over the pricing environment for LTL companies persist, which were reflected in the Bear Stearns decision to downgrade both Old Dominion and Saia to "underperform" from "peer perform."


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UPDATE 1-Bear Stearns to be sued over subprime funds-CNBC

(Reuters) - The lawsuit will be brought by the firm of Bernstein
Litowitz Berger and Grossman LLP, which represented investors
against WorldCom Inc. over a massive accounting fraud, CNBC
said.




According to CNBC, the lawsuit will allege Bear Stearns
made material misrepresentations in offering documents,
misrepresented risks of the hedge funds in those documents, and
misrepresented its ability to control those risks.


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TREASURIES-Subprime fears, Bernanke growth view boost bonds

(Reuters) - NEW YORK, July 18 - U.S. government bond prices
climbed on Wednesday as investors flocked into low-risk assets
on fears of the subprime mess and Federal Reserve Chairman Ben
Bernanke's view of the housing drag on growth.




There were heightened worries about the health of Wall
Street investment banks after Bear Stearns said late
Tuesday the pair of hedge funds it managed, which had invested
heavily in subprime mortgages, have "very little value."


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Bear Stearns Says There is `No Value Left' for Investors in Failed Funds

(Bloomberg) -- Bear Stearns Cos. told investors in
its two failed hedge funds that they will get little if any money
back after ``unprecedented declines'' in the value of AAA rated
securities used to bet on subprime mortgages.

Estimates show there is ``effectively no value left'' in the
High-Grade Structured Credit Strategies Enhanced Leverage Fund
and ``very little value left'' in the High-Grade Structured
Credit Strategies Fund, Bear Stearns said in a two-page letter.
The second fund still has ``sufficient assets'' to cover the $1.4
billion it owes Bear Stearns, which as a creditor gets paid back
first, according to the letter, obtained yesterday by Bloomberg
News from a person involved in the matter.


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Corporate Bond Risk Soars to 2-Year High on Bear Stearns Hedge Fund Losses

(Bloomberg) -- The risk of owning corporate bonds
soared to the highest in two years in Europe after Bear Stearns
Cos. said investors in two U.S. subprime hedge funds will get
little or no money back, credit-default swap prices show.

Contracts on 10 million euros ($13.8 million) of debt
included in Europe's iTraxx Crossover Series 7 Index jumped as
much as 36,000 euros to 324,000 euros, according to Deutsche
Bank AG. The risk premium is the highest since 2005 when General
Motors Corp. and Ford Motor Co. had their ratings cut to high
risk, high-yield.


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Australian Dollar Strengthens to 18-Year High on U.S. Hedge Fund Losses

(Bloomberg) -- The Australian dollar rose to the
strongest in 18 years on speculation losses at hedge funds run by
Bear Stearns Cos. will bolster demand for financial assets
outside of the U.S. that are perceived as safer.

The currency also rebounded to rise to a 16-year high versus
the yen after Bear Stearns told investors in one of its hedge
funds that they won't get any money back. Losses in U.S.
securities may push investors to buy assets in other countries
such as Australia, where the economy is improving. Government
bonds gained for a third day, while emerging-market debt fell.


Read more at Bloomberg Currencies News

Malaysian Ringgit Declines After U.S. Subprime Concern Spurs Risk Aversion

(Bloomberg) -- Malaysia's ringgit fell for a third
day on speculation losses related to U.S. subprime mortgages and
hedge funds will keep global investors away from emerging-market
assets. Bonds dropped.

The local currency headed for its biggest drop in a week
after losses reported by Bear Stearns Cos. hedge funds spurred
safe-haven demand for U.S. Treasuries. The risk premium on
emerging-market bonds widened to the highest in more than a week.


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U.S. regulators say hedge fund woes won't spread

(Reuters) - However, in testimony to Congress the regulators renewed a call for big global banks to improve their hedge fund risk management practices.




Favorable market conditions have helped the Bear Stearns-managed hedge funds to close out positions with a "limited impact on the broader markets," Erik Sirri, the Securities and Exchange Commission's market regulation director, told U.S. lawmakers.


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UPDATE 1-Citigroup, Merrill top underwriters amid strains

(Reuters) - NEW YORK, June 29 - Wall Street underwriters kept
busy in the second quarter, yet ebbing investor appetite for
lower-rated debt and riskier assets may dampen their summer.




In the last couple of weeks, investors have grown more wary
of risk, amid struggles at two Bear Stearns Cos. hedge
funds loaded with illiquid mortgage debt. Several companies
restructured junk bond offerings. Corporate raider Carl Icahn
said the private equity boom has "peaked." And while Blackstone
Group LP conducted a $4 billion initial public offering,
its shares fell below the IPO price less than a week later.


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PRESS DIGEST - Wall Street Journal - June 27

(Reuters) - * U.S. Foodservice underwriters pulled a $1.5 billion bond
offering amid investor resistance to its terms, an indication
of possible trouble for the buyout boom.




* The U.S. Securities and Exchange Commission opened about
a dozen probes involving bundled financial products, as well as
the related near-collapse of two Bear Stearns Cos.
hedge funds.


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UPDATE 1-US lawmaker:Bear Stearns woes won't cause meltdown

(Reuters) - WASHINGTON, June 26 - U.S. House Financial
Services Committee Chairman Barney Frank told Reuters on
Tuesday that subprime mortgage problems forcing a Bear Stearns
Cos. bailout of a hedge fund will not lead to broad
problems in the financial markets.




"There may be more problems with subprime loans," Frank
said when asked if the Bear Stearns fund problems might reflect
deeper subprime problems with hedge funds. "I don't believe
it's going to lead to a financial meltdown," the Massachusetts
Democrat added.


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