The cost of credit default swaps to protect against bond defaults have been soaring for top banks, especially Citi and Bank of America. Those prices did not plunge even as the euphoria over Citi CEO Vikram Pandit's profitability memo goosed the entire stock market. Bloomberg gets to the root of the issue: Bond holders are concerned they'll be forced to swallow massive losses if another bailout is in the works.

The fear is that they'll be forced somehow to swap their bonds for new bonds that carry reduced interest rates and face values. The market for these bonds reflect the added risk. GMAC bond holders, the article notes, were forced to take steep haircuts before the government intervened. 

For more:
- here's the article

Related Articles:
Citigroup on the mend?
Is the CDS market the next black hole?