Citigroup, Morgan Stanley auction-rate settlements; Merrill's moves Sobotka from fixed income to take over proprietary trading; Junk bond defaults heading to 10%?

Citigroup to Buy $7 Billion of Auction-Rate Debt in Settlement - Bloomberg 

Citigroup Inc., the largest U.S. bank by assets, agreed to buy back more than $7 billion in auction- rate securities and pay a $100 million fine to settle U.S. regulatory claims it improperly saddled customers with untradeable bonds.
 
  Citigroup will repurchase securities from individual investors, charities and small- and mid-sized businesses by Nov. 5, New York State Attorney General Andrew Cuomo said in a statement today. It must also take steps to ``expeditiously provide liquidity solutions to all other institutional investors,'' he said....

Morgan Stanley, Massachusetts Settles Auction-Rate Allegations - Wall Street Journal 

Morgan Stanley will pay $1.5 million to resolve allegations by Massachusetts that the New York bank misled municipalities in investing in auction-rate securities.
 
  Massachusetts Attorney General Martha Coakley said Morgan Stanley marketed auction-rate securities as "an appropriate investment when in fact that was not the case."...

Merrill's Debt Chief Sobotka to Lead Proprietary Trading Group - Bloomberg

Merrill Lynch & Co. said David Sobotka, the commodities trader who stepped in to lead the fixed-income division when it was reeling from mortgage losses, will take over a new unit to make bets with the firm's capital.

The Global Proprietary Trading group will consolidate units that trade stocks, bonds, currencies and commodities, New York- based Merrill said today in an internal memo confirmed by spokeswoman Jessica Oppenheim. The group will specialize in ``liquid markets,'' in which trading is frequent and buyers and sellers numerous.....

Defaults on Junk Bonds May Reach 10% as Economy Slows - Bloomberg 

The global default rate for speculative-grade company bonds may rise to as much as 10 percent over the next year as the economy slows, according to Moody's Investors Service.
 
  Defaults may reach 6.3 percent in 12 months, the highest in more than five years, and could be higher should the housing slump lead to a ``protracted U.S. recession,'' the New York- based rating company said in a report today. The failure rate increased to 2.5 percent in July from 1.5 percent a year ago.....