While most banks in Australia in recent briefings have argued that the outlook for credit quality is essentially benign - with no more "single name exposures" to bother about and arrears in consumer and business markets under control - the messages from money centre banks continue to be grim.JP Morgan Chase overnight said trading conditions "substantially deteriorated" in the July 2008 quarter and noted that spreads on mortgage-backed securities and loans "sharply widened". The US commercial bank said additional write-downs of US$1.5 billion in July were partly driven by Merrill Lynch's decision to sell US$6.7bn in distressed securities to Lone Star funds, a debt investor, for 22 cents on the dollar, the Financial Times reported.The alarm over the financial structure and certainty of the implied US government guarantee on mortgage funders Fannie Mae and Freddie Mac is also driving further mark to market write-downs.Reuters reported that in filing to the US SEC on Monday, JP Morgan said it expects continued deterioration in credit trends for its consumer portfolios, and that this will likely require additions to the consumer loan loss allowance during the rest of 2008.JPMorgan warned that additional write-downs were likely on a portfolio of US$16.3 billion of legacy leveraged loans and unfunded commitments (as at June 30).