Fears about Lehman CDS deadline seen as overstated (we'll know soon enough)

[girl gone mad]

NEW YORK (Reuters) - Tuesday's deadline to settle an estimated $400 billion in credit default swaps on debt in failed investment bank Lehman Brothers is unlikely to trigger new havoc in the market, derivatives analysts said.

Tuesday is the final day credit default swaps on Lehman's debt can be paid out.

Speculation has mounted that banks and other sellers have been hoarding cash to pay out a massive 91 percent loss on the contracts.

Some analysts on Monday attributed gains in the U.S. dollar to demand for dollars needed to pay the insurance.

But experts say the fears are exaggerated and in any case, losses may not be made public until companies post their next quarterly earnings in the months to come.

"There's been a lot of talk about this but I don't think it's that material, there has been a lot of misunderstanding," said Sivan Mahadevan, head of credit derivative and structured credit research at Morgan Stanley in New York.

"I think it's been overdone."

Continued...

http://www.reuters.com/article/idUSTRE49K0W120081021