Rumours of liquidity problems at Bear Stearns, which the bank denied, sent credit spreads sharply wider Monday and prompted a sell-off in US and European financial stocks, reports the FT. The cost of protecting the bonds of banks against default hit record levels as the CDX investment grade North America index climbed 11bp to 188bp, while the iTraxx Europe index added 5bp to 152bp. In London, the 3-month euro interbank rate rose 5bp to a two-month high. Worries about the US economy compounded concerns after last Friday’s dire non-farm payrolls data, although oil prices hit fresh highs. Meanwhile, US stocks slid, particularly mortgage financiers including Bear, which plunged as much as 14% on the day.
