UPDATE : Rumours circulating that Lloyds are looking to buy HBOS on the cheap. HBOS slumped 51% at one point, now bounced to off 19%. FSA has released a statement saying HBOS is well capitalised…

UPDATE II : Robert Peston’s reporting has been, errm, interesting. He said earlier this morning that Lloyds was looking at paying £3 for HBOS. This seems suspiciously toppy.

Peston should have known that the disastrous HBOS rights issue in late July was priced at £2.75. The market shunned it with the underwriters getting stuffed and left holding two-thirds of the £4 billion offering. So why would Lloyds want to pay more than the price which was shunned two months ago when conditions have deteriorated? Doh! He now says it will be nearer to £2.

Peston needs to be careful that he doesn’t get accused of creating a false market. There are laws and a Stock Exchange Regulatory New Service for market moving news!