Lehman's Leavings

The collapse of Lehman Brothers is still reverberating through the markets.

An auction of Lehman Brothers credit default swaps today went somewhat worse than feared. While banks and other sellers were hoping to get 9 to 12 cents on the dollar, the price for the contracts came at 8.625 cents, according to Markit, meaning that those who sold insurance on Lehman debt will have to pay out 91.375 percent of it to holders.

That will be a big hit to a number of banks and hedge funds. Indeed, Lehman is by far the biggest debt default in years.

And while the good news is that the auction is now over, the process itself is not, as Felix Salmon noted earlier. The settlement date is October 21.