NEW YORK, Sept 23 The cost to insure the debt
of Washington Mutual (WM.N) jumped significantly on Tuesday and
credit spreads on all financial companies weakened on
uncertainty over government plans to bail out the sector.
Credit default swaps on WaMu's debt surged to an upfront
cost of 54.5 percent the sum insured, or $5.45 million paid
upfront to insure $10 million in debt for five years, from 40
percent on Monday evening, according to Markit Intraday. The
swaps also require annual payments of 5 percent.
WaMu's credit default swaps have been volatile on concerns
about the thrift's mortgage exposures.
Credit default swaps trade on an upfront basis when a
company is considered distressed and sellers of protection want
to be paid more at the outset of the contract due to higher
perceived risk of the firm defaulting on its debt.
Moody's Investors Service on Monday said it may cut WaMu's
credit ratings deeper into junk from "Ba2," two steps below
The Financial Times reported late on Monday that regulators
are growing impatient for the thrift to be acquired by a
stronger firm and may push for it to be split between a few
(Reporting by Karen Brettell; Editing by Chizu Nomiyama)