UPDATE 1-Wachovia's CDS spreads narrow on Wells Fargo deal
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NEW YORK, Oct 3 (Reuters) - The cost of insuring Wachovia Corp's WB.N debt with credit default swaps fell sharply on Friday on news the bank has reached a deal to be bought out by Wells Fargo & Co (WFC.N) for about $15.1 billion.
Wells Fargo's credit insurance costs rose modestly, however, on news it is acquiring the weaker-rated bank.
Wachovia's five-year credit default swaps fell by about 144 basis points to about 249 basis points, or $249,000 a year to protect $10 million of debt, according to data from Phoenix Partners Group. Wells Fargo's five-year credit default swaps rose by about 22 basis points to 178 basis points.
Credit insurance costs also fell for Goldman Sachs (GS.N) and Merrill Lynch MER.N. Goldman's five-year credit default swaps fell by 25 basis points to 408, while Merrill's fell by 21 basis points to 385, according to CMA DataVision.
The deal between Wells Fargo, one of the strongest U.S. banks, and Wachovia scuttled a previously announced deal for Citigroup to buy parts of Wachovia. For details click on [ID:nN03460047].
Wells Fargo has one of the highest ratings of any U.S. banks, at "AA-plus" by Standard & Poor's and "Aa1" by Moody's Investors Service, both agencies' second-highest investment grade rating. (Reporting by Dena Aubin; Editing by James Dalgleish)
