One of the earliest and most spectacular casualties of the credit crisis were SIVs or structured investment vehicles. They were essentially ways to play the carry trade, funding long-term high-yielding securities with short-term borrowings. Everything was great as long as credit flowed freely and the high-yielding securities were not saddled with huge numbers of defaults. Once the CDOs in the SIVs turned to dust, no one would by buy the commercial paper needed to fund the structures.
Rumors that more of these structures were in trouble swept the markets this morning and helped drop stocks almost 200 points. A short while ago, Moodys said it may downgrade $19 bln of these structures. Once the news was out of the way (and not as bad as feared, apparently) stocks began to make a comeback. EUR/JPY jumped and stocks recovered about 100 points.
Lousy car sales are just hitting the wires with Ford reporting a 33% drop in sales to levels not seen in over 20 years.
