hr: Money

There has been a rise in cost of shielding corporate bonds from default with the surge in the rate of unemployment coupled by the increase in oil prices, which has now gone beyond $139 per barrel, fueling concerns that the ailing US economy will worsen still.

On benchmark indexes, credit-default swaps increased, which was its fourth for the week, as it hikes the cost of debt protection costs to nearly two-month high. Contracts that are linked to American International Group Inc. have risen on hunch that that US regulators are scrutinizing company credit swaps accounting connected with subprime mortgages. The cost of shielding bank debt also increased, which was led by some of the most prestigious financial institutions such as Lehman Brothers Holdings Inc. and Wachovia Corp.

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There is a growing concern regarding the discouraging payrolls reports, for five months in a row now, might trigger a series of corporate defaults, aggravated further by surging materials and fuel costs plus strained bank balance sheets.

“This is a sign of real softness in the labor market. There are forces at work - oil prices, housing prices, difficulty getting a job when you have been laid off and the credit crunch - that are going to make things worse,” according to chief US economist Roger Kubarych, Unicredit Global Research.