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CDS Flow Summary - Mortgage lenders, Cendant, autos reverse
Informa Global Markets - CDS Morning Insight (US) (February 14, 2007)

What goes up must inevitably come down. It was beginning to look like the mortgage lending sector might be somehow exempt. But even the brisk widening in lender and servicer CDS over the past few sessions arrested today. Hardest hit ResCap eased back along with Countrywide and CIT.

ResCap, which has been cited by analysts as having about USD900mln in off-balance sheet securitizations as well as on balance sheet securitizations, tightened in default along with the general mortgage market. The subprime losses seem contained to that market and a few firms as opposed to a general contagion felt throughout the lending sector. Still, ResCap is the highest on the list of those firms to be eyed, along with Capital One. Default in ResCap eased to 107/111 from 110/115 with sizable trade going through at 110.

Also easing back was default in Countrywide Home Loans, which tightened to 33 from 35. CIT eased to 25 from 27, while MGIC and PMI tightened to 31 from 35. Radian tightened to 32 from 35, while SLM Corp eased 1 bp to 27. Even life and disability insurer UnumProvident tightened to 48 from 60.

General Motors, meanwhile, had its own reasons to tighten, as Merrill upgraded the firm over the prospects of a favorable labor agreement. It cut Ford, however. The news was welcomed by credit investors in both GM and GMAC. The very same investors were not too daunted by GM's talk of zero-percent financing offers. GM tightened to 320/328 from 335/340, while GMAC eased to 102/105 from 105/110. Ford lagged the performance and tightened to 440/445 from 445/450, while Ford Motor Credit was left 229/235 from 230/235.

Parts makers were also active on back of the auto tightening. Lear dealt at 350/360, in from 358/368, while American Axle finished at 238/248, in from 242/250. ArvinMeritor eased to 228/238, though Visteon widened to 445/455 from 438/448. Elsewhere, takeovers, splits and ratings news prompted CDS trade in Alcoa, Cendant and Hilton Hotels. The former was under speculation for a takeover bid from BHP Billiton and Rio Tinto, but BHP denied the interest. CDS in Alcoa widened to 15/16 from 14/15. Cendant's deliverable status was cleared up. Avis Budge Car Rental debt is now deliverable into Cendant CDS. Cendant CDS tightened to 166 from 175/180. Hilton eased to 98/100 from 105/110 as it touted its hopeful move to investment grade.

Kathleen Fitzpatrick Hoffelder



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