Lehman, Merrill debt protection costs rise

NEW YORK, May 22 (Reuters) - Debt protection costs on U.S. brokers, including Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research, Stock Buzz) and Merrill Lynch & Co (MER.N: Quote, Profile, Research, Stock Buzz), rose on Thursday after analyst Richard Bove downgraded several banks, saying they may perform poorly this summer.

Bove, an analyst at Ladenburg Thalmann & Co, downgraded Goldman Sachs Group Inc (GS.N: Quote, Profile, Research, Stock Buzz), Lehman Brothers and Merrill Lynch to "sell" from "neutral."

He also cut his 2008 outlook for the banks as well as that of Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz), which he still rates "neutral." For details, see [ID:nBNG208216]

Credit default swaps on Lehman Brothers and Merrill Lynch were among the largest movers. Lehman's debt protection costs rose 25 basis points to 205 basis points, or $205,000 per year for five years to insure $10 million in debt, according to broker Phoenix Partners Group.

Merrill's swap spreads were 22 basis points wider at 197 basis points. Morgan Stanley widened 17 basis points to 245 basis points and Goldman Sachs widened 15 basis points to 105 basis points, Phoenix data showed. (Reporting by Karen Brettell; editing by Gary Crosse)