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CDS Flow Summary - Homebuilders make a tightening turnaround
Informa Global Markets - CDS Morning Insight (US) (October 18, 2006)

U.S. homebuilders sentiment improved marginally in October, a sign the market may be stabilizing, the National Association of Home Builders said Tuesday. The NAHB/Wells Fargo housing market index rose 1 point to 31 in October. 5yr year default in homebuilders such as Toll Brothers Inc pulled in tighter on the day finishing with a market of 105/115, after seeing trade occur at 120 earlier in the session on Tuesday (D/D -15 bps). Also making their way tighter was 5yr default in Lennar Corp and Pulte Homes Inc which finished with markets of 67/72 & 55/60 respectively, in from Monday's closing mids of 77 and 68.

With rumors swirling that the world's largest gaming company, Harrah's Entertainment Inc, may reject a USD15.5bln buyout offer from private-equity firms Apollo Management LP and Texas Pacific Group, the company's default continued to tighten on Tuesday, surging in another -25 bps to a closing market of 210/220 with trading being seen at 230 and 225 earlier in the session. In the industrial sector default in AK Steel moved inward to a closing market of 240/245 from Monday's close of 245/255.

In the Financial sector Merrill Lynch saw its profit surge 121% to USD3.05bln, or USD3.17 a share, from USD1.38bln, or USD1.40 a share in the year-ago Revenue also rose 48% to USD9.9bln. 5yr default in the company finished with a market of 16/18 on Tuesday with trading at 16 a few times during the day.

Elsewhere billionaire investor Carl Icahn, known for demanding change from the managers of numerous companies, has signed an agreement to buy USD200mln worth of stock in auto supplier Lear Corp. Under the agreement, Lear would issue USD200mln worth of stock in a private placement to funds managed by Icahn, and for his investment, Icahn would get a representative on Lear's board. 5yr default in Lear took a -42.5 bps dive to a closing market of 430/445. Meanwhile default in General Motors Corp made a marginal +3 bps widening move to 518/523 and GMAC made no noise on the day as it finished with a market of 160/162. 5yr default in Ford Motor Corp made its way out +9.5 bps to a closing market of 657/667, with trade being seen at 655 earlier in the session and 660 in the later stages on the session on Tuesday. FMCC also pulled wide, finishing at 364/369 which is out from the prior day's close of 360/365. Default in Cooper Tire & Rubber made a widening push on Tuesday, eventually ending with a market of 485/505 (D/D +35 bps).

Andre Hinckson



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