July 30 (Bloomberg) -- The risk of owning corporate bonds rose to the highest in at least three years after a German bank slashed its profit forecast because of ``massive uncertainty'' in the market for subprime mortgages and credit.
Indexes linked to credit-default swaps in Europe and the U.S. rose to the highest since they were created in 2004, showing that the perception of credit quality is deteriorating. Contracts on Dusseldorf-based IKB Deutsche Industriebank AG IKB, which allow investors to speculate on its ability to repay debt, jumped to six times the prices of a month ago. Goldman Sachs Group Inc. rose to the highest on record.
``It's pure fear,'' said Gary Jenkins, a partner at London- based hedge fund Synapse Investment Management, which manages $650 million of debt assets. Jenkins was head of fundamental credit at Deutsche Bank AG before joining Synapse in April. ``It's fear of the unknown, fear of hedge funds unwinding, fear of knock-on effects of the subprime meltdown.''
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