Beyond subprime, risks abound

http://online.wsj.com/article/SB118273174517146600.html?mod=mkts_main_featured_stories_hs

Beyond Subprime, Risks Abound
By SCOTT PATTERSON
Wall Street Journal, June 25, 2007; Page C1

...Pressure on the risky end of the bond market also is ratcheting up. Investors have pulled more than $1 billion out of high-yield bond funds in the past two weeks...

Another worry concerns a wave of adjustable-rate mortgages that will reset later this year and next year, raising the odds that defaults will continue to rise. About $515 billion of ARMs are scheduled to reset this year, and an additional $680 billion will reset in 2008, according to Bank of America. Worse, roughly three-fourths of those loans are to borrowers with poor credit histories.... [For perspective, $515B + $680B = $1.195T. That's 9.6% of the U.S. GDP of $12.5T. -- W]

Don't expect the Federal Reserve, which meets this week, to ride to the rescue. Inflation concerns remain paramount at the Fed. And Fed officials still argue that the pain from the subprime mess will be contained.[end quote]

Wendy