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WorldCom woes hit hedge funds

Date: Wednesday, July 3, 2002

WorldCom Inc.'s woes are starting to hit hedge funds and the entire corporate bond market, raising red flags for the rest of the economy," writes Gregory Zuckerman in today's Wall Street Journal. "Traders say the WorldCom fallout, which has produced one of the worst stock-market weeks in years, also is causing serious dislocations in credit markets, making it difficult to trade all kinds of corporate bonds, because buyers suddenly are in short supply. If things get worse, analysts fear a number of big firms may have to bail out of their positions in WorldCom and other bonds, causing more damage to the market." "The pain has spread throughout the corporate bond market, hitting both investment-grade and junk bonds, especially companies like Qwest Communications International Inc., Tyco International Ltd. and AOL Time Warner Inc.'s America Online, which have been accused of using aggressive accounting or have seen executives under fire."