Bear Hedge Funds Wiped Out
It was revealed today that the two troubled Bear Stearns hedge funds have been wiped out. Ouch. The markets cannot seem to price subprime debt. The uncertainty is too great. The ABX index tracks subprime debt and it keeps hitting new lows everyday. I cannot find how to get information on this index. The one silver lining to the subprime market is that rates may drop to support the housing market. I mentioned before Bill Gross' opinion that rates need to drop 60 bps to 120 bps to slow the housing market fall (and this is when the ten-year Treasury was at 4.60%). Interest rates have dropped from their mid-June highs and are now 5.01%. If rates keep falling this will ease the pressure on subprime markets. This needs to happen before the nervousness in the subprime market further spreads to the corporate markets.