Are we done yet?

Moody's Investors Service may cut the top ratings on six of Citigroup's seven structured investment vehicles as part of a review of $130 billion in SIV debt. The net asset value of the $64.9 billion in Citigroup SIVs dropped to below or near 60 percent, prompting the ratings action, Moody's said in a statement. Moody's cut $14 billion in debt in all, mostly capital notes that rank below commercial paper and medium-term notes, and placed $105 billion of debt on review for a downgrade and confirmed the ratings on $11 billion. Links Finance Corp., a SIV sponsored by Bank of Montreal with $19.1 billion of debt, also had its junior notes cut and may have the remainder downgraded, Moody's said.

John Paulson, the manager whose credit hedge funds gained an average of 440 percent this year on bets against subprime mortgages, said corporate debt will be the next to fall as the U.S. economy heads toward recession. Interest-rate cuts may fail to prevent a recession, which Paulson called likely. "Financial Sector: On the Brink?'' companies that Paulson named as representative of deeper troubles included securities firms Bear Stearns, Merrill Lynch & Co. and Citigroup Inc., as well as bond insurer Ambac Financial Group Inc. and credit-rating firm Moody's Corp.

Fortis, part of the group that bought ABN Amro in Europe's biggest-ever banking takeover, raised 3 billion euros ($4.4 billion) by selling bonds convertible into shares to help pay for the purchase. The Fortis bonds will pay annual interest 2 percentage points higher than the three-month euro interbank offered rate, or Euribor. Fortis will pay about 6.81 percent, that compares with a coupon of 7.5 percent for the first year on 7 billion euros of convertible notes sold last month by Spanish lender Banco Santander for its part of the ABN acquisition. Santander will pay 275 basis points more than Euribor in subsequent years. Citigroup is paying 11 percent interest on $7.5 billion of convertible securities that the biggest U.S. bank sold to the Abu Dhabi Investment Authority this week. Banks sell equity-linked bonds because they help build the capital reserves required by regulators to protect depositors against losses, known as Tier 1. "For the financial sector, Tier 1 capital is vital right now."

Worst case scenario for some after ETrade Financial's firesale of mortgage-backed securities: Merrill Lynch could take a $9 billion after-tax hit to the valuation of assets underpinned by subprime mortgages and Citigroup's after-tax write-down could be $26 billion, if the assets were marked down to 26 cents on the dollar. Goldman Sachs analysts said they were surprised by the size of the discount on the ETrade portfolio because 73 percent of the assets were backed by prime mortgages, or loans to people with solid credit.

Deutsche Bank is threatening to abandon plans to back Virgin Group's bid for Northern Rock, which is estimated to have borrowed up to 29 billion pounds ($60 billion) from the Bank of England (BoE) since it was forced to seek emergency loans. Deutsche is one of three banks talking to Virgin about providing 15 billion pounds to repay the BoE, but now had "serious issues" with Virgin's takeover proposals, and was concerned that Virgin had issued "disinformation" on its level of involvement.

A severe bout of illiquidity has hit eurozone government bonds, threatening to impair the ability of some governments and other borrowers to meet their funding needs in coming months, according to market specialists. It underlines the degree to which problems in the US subprime mortgage market is spilling over into seemingly unrelated sectors, including traditionally safe government bond markets in the single currency region.

Shares in Adidas rose more than 3 percent on Monday as traders cited market talk that U.S. rival Nike and Japanese sports shoe maker Asics were interested in the German company.

Beijing is considering plans to let foreign governments issue yuan- denominated bonds in the mainland and hopes Hong Kong and overseas companies will list on its stock markets. By reducing the need for institutions to buy yuan with US dollars, it would also help relieve some of the upward pressure on the yuan.

Australian company gross operating profits fell 2.1% to a seasonally adjusted A$46.52 billion in the third quarter of 2007 from the previous quarter, the Australian Bureau of Statistics said Monday. Economists surveyed ahead of the announcement on average predicted company profits rose about 2.0% in the third quarter from the previous quarter.

New Zealand’s dollar dropped after Gulf Arab nations said they won’t revalue their currencies, pegged to the dollar, spurring investors to boost holdings of the US currency.

Treasuries rose as Federal Reserve Bank of Boston President Eric Rosengren said the U.S. economy's expansion will be ``well below'' its long-term pace for two quarters. "We are currently expecting the economy to grow well below potential for the next two quarters, before gradually improving over the course of next year,'' Rosengren said. ``Our research suggests that the foreclosure crisis will get worse before it gets better, but our forecast is quite dependent on how far house prices fall.''

European government bonds climbed after Moody's Investors Service said it is preparing the biggest credit-rating cuts since U.S. subprime-mortgage defaults hit financial markets, fueling demand for the safest assets. Benchmark debt also gained, extending last month's drop in 10-year bund yields, as concern the rising costs of interbank lending will crimp economic growth pushed stocks in Europe lower. The yield on the 10-year bund, Europe's benchmark, fell 4 basis points to 4.10 percent by noon in London.

The cost of borrowing in pounds for a month climbed the most in more than 10 years as banks sought funds to cover their commitments through to the start of 2008 amid a credit squeeze. The London interbank offered rate jumped 63 basis points to 6.72 percent, the highest since December 1998, the British Bankers' Association said today. However the overnight rate fell back to 5.887 pct, having hit 5.9500 on Friday -- its highest rate since Sept 28.

Oil prices fell about $1 a barrel Monday in a volatile market on speculation that OPEC may still boost output at its meeting this week, despite last week's sharp price drop.The low-yielding yen benefited as caution emerged following a British newspaper report that Royal Bank of Scotland is expected to announce up to 2 billion pounds ($4.1 billion) of credit-related losses this week. The dollar, which last week recorded its biggest weekly jump against the yen in nearly 2- years, slipped to 110.58 yen from last week's peak near 111.25 yen. The euro also pared last week's gains against the yen, slipping to 162.18 yen from last Friday's high of about 163.85 yen. Against the dollar, the single currency edged up to $1.4667 steadying from last week's fall to two-week lows.

The Tokyo Nikkei average finished at 15,628.97 down 51.70 points (0.33%). In Hong Kong the Hang Seng index finished at28,658.42 up 14.8 points (1 0.05%). On the mainland the Shanghai Composite ended at 4,868.611 down 3.167 points (0.07%). In Europe afternoon trade the CAC 40 was down 32.08 points (0.57%), the DAX was down 20.59 points (0.26%) and the FTSE 100 was down 43.10 points (0.67%).