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[Insider]

The high-yield bond and leveraged loan markets are off sharply again Friday. The big news is that KKR postponed deals to finance its buyout of Alliance Boots, that the Chrysler loans are running to more resistance, and that banks are bracing for more losses from bridge loan exposure. One fund manager with knowledge of the Chrysler deal says that only half of the book is filled, and the deal terms are getting close to the point that they're not economically feasible for J.P. Morgan (JPM:NYSE), the lead underwriter. Market participants are wondering if Chrysler will become a hung bridge loan situation for JPM. The JPM questions come as Citigroup's CFO said on a call Friday morning the firm was unable to sell debt to investors on four deals in the second quarter, leaving Citi with the bridge loans on its balance sheets. The CFO says he's braced for more balance sheet hits from unsold deals in the third quarter as well, Dow Jones reported. Meanwhile the CDX 8, the derivatives index tracking high yield bonds, has widened another 25 basis points Friday morning to 437 basis points over Libor. Was 395 on Wednesday, and 250 at its recent lows. The LCDX, the derivatives index tracking the leveraged loan market, is also wider by about 25 basis points, at 287 basis points over Libor. This index typically has resistance at a 300 spread. Risk premiums on the U.S. automaker credit default swaps, or derivatives that track its bonds, are wider by about 50 basis points this morning on the Chrysler news. Fund managers in the high-yield and leveraged loan space have a LOT of auto paper, from when Ford (F:NYSE) and GM (GM:NYSE) were sliced to junk in 2005. Ford stock is down 2.6% and GM down 1.7% in recent trading. It appears fund mangers in the space are acting on their oft-uttered words, "The last thing I need is more auto debt