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USD CDS Summary: Merrill Lynch sees a net income surge
Andre Hinckson, Informa Global Markets - CDS Morning Insight (US) (July 19, 2006)

On Tuesday the financial sector saw Merrill Lynch & Co. Inc, report a Q2 net income rise of 44%, largely because of gains in its equities markets business and its private equity unit. Merrill's net income surge to USD1.6bln, or USD1.63 per share, from USD1.1bln, or USD1.14 per share in the year-ago period. The company also reported that revenue increased to USD8.16bln from USD6.3bln. 5yr default in Merrill Lynch saw some late day trade at 24, and eventually closed with a market of 23/26.

Joining the fray was Wells Fargo & Co, as it reported at Q2 profit of 9% as its loan portfolio grew and its charge offs declined. The company said it earned USD2.09bln, or USD1.23 per share in the quarter compared to USD1.91bln, or USD1.12 per share a year ago. 5yr default in Wells Fargo finished with a market of 10/13 on Tuesday, which is slightly tighter than Monday's closing market of 11/14.

5yr default in Lehman Brothers Holdings Inc trade at 26 on Tuesday, and closed with a market of 27/30. Home builders confidence plunged to a 15yr low in July, reflecting growing worries about rising interest rates and declining affordability, which cause the Home builders sector to trade lower on Tuesday as bond yields moved up after a government report showed a bigger-than-expected increase in produce prices, triggering inflation concerns. The news had some effect on a couple names like, Centex Corp which saw its default widened slightly to a closing market of 72/81, while joined by Lennar Corp which saw its 5yr default extend out to a closing market of 87/95 on Tuesday.

In the auto sector Rick Wagoner said he expects earnings to increase at General Motors Corp, after a loss in the Q2 tied to severance packages for 35,000 U.S. workers. Meanwhile GMCO's 5yr default could be seen declining 7.5 bps to a closing market of 835/850, which is compared to Monday's close of 840/860. 5yr default in GMAC also made its way to a tighter close, as it finished on Tuesday with a mid of 257, which is 5.5 bps tighter than Monday's closing mid of 262.5. Elsewhere Ford Motor Co, said it expects European sales growth to accelerate in the next six months as the S-Max and Galaxy minivans, which were introduced this spring, becomes fully available. 5yr default in the company's financial arm Ford Motor Credit eased out slightly wider compared to Monday's closing mid of 507.5, which is now up 3.5 bps to a closing mid of 511 on Tuesday.

Andre Hinckson



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