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Iraqi Bonds Safer than American Banks

Companies / Credit Crisis 2008 Aug 29, 2008 - 02:05 PM GMT

By: Mike_Shedlock

Companies Best Financial Markets Analysis ArticleBloomberg is reporting Iraq Safer Than Ohio Banks Stung by Credit Crisis .
Iraq's bonds are delivering the biggest returns in emerging markets as oil export revenue bolsters government finances and violence declines.

The country's $2.7 billion of 5.8 percent bonds due 2028 gained 45 percent since August 2007, according to Merrill Lynch & Co. indexes. Investors demand 4.84 percentage points more in yield to own the debt instead of Treasuries, down from 7.26 percentage points a year ago. The spread is narrower than for notes of Ohio banks National City Corp. and KeyCorp, suggesting Baghdad may be safer for bond investors than Cleveland.


Iraq's bonds, which don't have a credit rating, rallied even as more than $500 billion of credit market losses and writedowns drove investors away from all but the safest government securities.

National City (NCC) and KeyCorp (Key), based in Cleveland, have debt ratings of A and spreads of 9.59 percentage points and 7.55 percentage points. The banks are two of the more than 70 firms worldwide that have recorded about $512 billion in losses and writedowns since the start of 2007 amid the collapse of the subprime mortgage market.

FDIC Ready For More Bank Failures

The FDIC is ramping up staff in preparation for more bank failures. Please consider FDIC Adds Office Space in Dallas, Ready for More Bank Failures .

The Federal Deposit Insurance Corp. is preparing to sign a five-year lease to add five floors of space at its Dallas regional office as the agency prepares to increase scrutiny of failing and troubled U.S. banks.

The federal agency, which insures deposits and disposes of failed banks and their assets, will add 125,000 square feet to the 185,000 square feet it rented last year at 1601 Bryan St., a 49- story tower in downtown Dallas. That agency will add about 300 staff at the building, including some of the 69 retirees it is bringing back to help handle the increased workload, said spokesman Andrew Gray.

At least a dozen U.S. lenders and credit unions have been closed by state and federal regulators since last year, and the FDIC said on Aug. 26 it had 117 banks on its "problem list." On Aug. 22, Columbian Bank and Trust Co. of Topeka, Kansas became the ninth U.S. bank to collapse this year.

Dallas is the headquarters of the agency's Division of Resolution and Receivership, the unit that handles failed banks. The staff additions would bring the total number employees at that location to about 850, he said.

The FDIC last year leased seven floors at 1601 Bryan, also known as Energy Plaza, for 10 years, Gray said. The agency will be completely moved into the space by Nov. 1, he said.

The 1.3 million square-foot skyscraper should have about 300,000 square feet vacant once the FDIC takes its new space, said Carl Ewart, managing director at real estate brokerage Jones Lang LaSalle's Dallas office. Gray said the agency has no plans to expand beyond its current 310,000 square feet, "but that could change."

So Baghdad is safer than Cleveland. Who would have thought that?

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2008 Mike Shedlock, All Rights Reserved

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