by Calculated Risk on 6/10/2011 08:50:00 AM

A couple of stories. The first is about the recent selloff in risky assets (junk bonds), and the second is a little reminiscent of some of the funding issues back in 2008 (this time in Europe):

From the WSJ: 'Junk' Bond Market Hit by a Selloff (ht Brian)

A steep decline in prices of bonds backed by subprime mortgages has spread through the riskiest segments of the credit markets ... Weak economic data including falling home prices and disappointing jobs numbers have led investors to dump these securities ... The decline in high-yield, or "junk," corporate bonds accelerated after last week's employment figures, with prices falling nearly 1% on Thursday, the worst one-day loss in three months ...

And from the WSJ: Bond Deal May Augur More European Travails

Investors balked at buying a €1 billion ($1.46 billion) bond offering by Banco Santander SA that was backed by debt of Spanish local governments ... That left a group of big European banks that managed the deal holding roughly €500 million of the debt.

The lack of demand ...underscores the jittery nature of the region's credit markets. That some of the biggest banks in Europe, including Commerzbank AG, HSBC Holdings PLC and Société Général SA, were left holding the bag also demonstrates how easily sovereign risk can spread around the euro zone.

Prior to the financial crisis, many banks were stuck with lousy Residential Mortgage Backed Security (RMBS) that they couldn't sell to investors (all that Alt-A and Wall Street subprime - the worst of the worst mortgage loans). This story, about European banks getting stuck with debt backed by local Spanish governments, reminds me of those problems (although the overall situation is not as dire).