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CDS Flow Summary - Roll minimal;Ford, GM auto shorts squeezed
Informa Global Markets - CDS Morning Insight (US) (December 20, 2006)

The roll to the March benchmark tomorrow from December for single name CDS contracts has mostly been taken in stride. Spread tightening has already gradually occurred in the single name market ahead of the new contract date in recent weeks, as evidenced by the stronger bids than usual seen in the market today. Dealers did not notice a bevy of activity ahead of the move tomorrow, but with tighter CDS in Ford Motor Co and General Motors today, those who had short positions in the benchmark names were getting squeezed. Ford Motor Co default tightened to 560/565 from 565/575, while Ford Motor Credit CDS tightened to 305/310 from 307/312. Default in GM eased to 405/415 from a mid of 427. GMAC tightened to 105/110 from 115/120.

While the autos were taking up the attention of the market today, most players still kept a watchful eye on when, not if, casino company Harrah's Entertainment would announce its acceptance of the bid from Apollo Management and Texas Pacific Group. After the equity market closed today, Harrah's accepted a USD17.1bln bid from the team, marking one of the largest private-equity buyouts. Default eased to a mid of 220 just ahead of the news from a mid of 232 Monday.

Homebuilder Hovnanian was a bit more vocal about its ability, or lack of ability, to compete in the struggling housing market. On the heels of Hovnanian reporting a fourth quarter loss of USD117.9mln Monday, CEO Ara Hovnanian said the current housing slump was unprecedented. Default widened with offers at 209 from 200/205.

Temple-Inland tightened in CDS to 62/67 from 64/68. The activity comes after decent trade Monday. It is part of an ever-consolidating paper sector.

In other moves, Six Flags was at 600/635 from a mid of 630. It has widened in previous sessions. The firm is still challenged by its reliance on seasonal factors. Financial movers included Lehman at a market of 18/19 and Merrill at 15/16, both in by one bp. Morgan Stanley reported a rise in profit at net income for the fourth quarter up 26%. It also plans to spinoff its Discover unit, as pressured in the market previously. Ahead of the news, default was at 19/20. Retailer movers included RadioShack with a market of 180, out from trade at 177 Monday. Aerospace firm Boeing was out one bp at a mid of 9 basis points.

Kathleen Fitzpatrick Hoffelder



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