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Insuring Morgan Stanley (MS) Becomes as Risky as Insuring Some Italian Banks

September 30, 2011 7:39 AM EDT
Morgan Stanley (NYSE: MS) has been one of the landmarks of American capitalism for decades, providing financial services and funding to businesses and individuals alike.

But is Morgan Stanley becoming as risky as Italy?

According to reports Friday, Morgan Stanley's credit-default swaps have been priced as being less creditworthy than most U.S., U.K., and French banks -- being put right alongside Italy's riskiest lenders.

Investors aiming to insure themselves against Morgan Stanley entering default on its five-year debt surged to 456 basis points, amounting to $456,000 for every $10 million in debt, Bloomberg notes. The number is up significantly from 305 basis points on September 15th, just two weeks ago.

Bloomberg reports Italian banks Intesa Sanpaolo SpA and UniCredit SpA have CDSs trading at 405 and 424 basis points, respectively.

Moody's said the decline suggests investors are betting Morgan Stanley will have its credit rating downgraded from Ba1 to Ba2.

Bank of America (NYSE: BAC) CDS's are trading at 403 basis points, while French bank Societe Generale is at 320 basis points. Both levels imply a debt rating of Ba1.

Morgan Stanley shares are down about 2.6 percent in pre-market action Friday.


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