Bear Stearns’ Implied Default Probability Up by More then 65% at

London - 14 March 2008 by Savvysoft has released implied default probabilities for Bear Stearns for the past several weeks. A chart shows the default probabilities rising steadily from 4.88% on March 5 to 8.26% on March 13, an increase of more than 65%.

The default probabilities calculated at are based on a bond's spread to the Treasury curve. A corporate bond trades at a higher yield, and therefore a lower price, than a Treasury, to compensate for a possible default. The larger the price discount, the greater the market believes is the chance of default. These implied default probabilities are an independent, objective and accurate measure of what the market as a whole thinks is the chance of a company defaulting.

The Bear Stearns default probability history:

Date Default
3/5 4.88%
3/6 5.69%
3/7 6.05%
3/10 6.65%
3/11 7.74%
3/12 7.60%
3/13 8.26%

"Rumors have a way of turning out to be true, and that was certainly the case here," said Rich Tanenbaum, President of Savvysoft. "But even if you weren't clued into the rumor mill, CorporateDefaults told us that the market was expecting problems at Bear Stearns."

CorporateDefaults tracks the implied default probabilities of thousands of issuers, and is updated daily.

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