‘The credit crunch is here'(ZT)

‘The credit crunch is here'

by gjohnsit

Sat Aug 04, 2007 at 08:52:55 AM PDT

Credit Crunch:Credit crunches are usually considered to be an extension ofrecessions. A credit crunch makes it nearly impossible for companies toborrow because lenders are scared of bankruptcies or defaults, whichresult in higher rates. The consequence is a prolonged recession (orslower recovery) resulting from the supply of credit having shrunk.

  Keith Shaughnessy, president of Foundation Mortgage Corp., declared today that the credit crunch has arrived.Who is Keith Shaughnessy? No one particularly important, and thereforehis declaration wouldn't be significant...except that the CFO ofinvestment bank Bear Stearns pretty much echoed this claimwhen he said, "It's been as bad as I've seen it in 22 years. Thefixed-income market environment we've seen in the last eight weeks hasbeen pretty extreme."

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  There were no junk bond issuances this past week. None at all. There were no international dollar bond issuances either. Nada.
  In the years I've been watching the markets I can't say that I've ever seen that happen.

 Major players in the field of the bond market are saying things like:

"It's mind-boggling. This last week, the velocity of losses haspicked up dramatically. The models work when they look at history, butnot when history is all new."

'The market for mortgage bonds has become "very panicked and illiquid."'