Friday, 5 October 2007

Sub-prime delinquincies accelerating

Subprime Delinquencies Accelerating, Moody's Says

Subprime mortgage bonds created in the first half of 2007 contain loans that are going delinquent at the fastest rate ever, according to Moody's Investors Service.

The average rate of "serious loan delinquencies'' in the securities has been higher than 2006 bonds, New York-based Moody's analysts Ariel Weil and Amita Shrivastava wrote in a report today. Serious loan delinquencies are those 60 days or more past due, including properties in foreclosure or already foreclosed upon.

"It is shocking what you see,'' said Kyle Bass of Hayman Advisors LP, a Dallas-based hedge fund that reported a 400 percent return on its bet the U.S. housing market would fall. "Anything securitized in 2007 has got to have the worst collateral performance of any trust I've seen in my life.''......

The perceived risk of owning subprime mortgage bonds created in the first half of 2007 rose today, according to traders of ABX indexes of credit-default swaps.

The ABX index linked to 20 securities from the first half and given the lowest rating of BBB- fell 2.5 percent to 36.67, the lowest since the index began trading in July, according to, Markit Group Inc., the index administrator. The index rated AA, the second-highest rating, fell 0.93 percent to 87, London-based Markit's composite prices show.

I'm glad I ran into this article as I hadn't looked at the ABX indexes for a while. Below is the ABX-HE-BBB- 07-2 mentioned in the article. Not a pretty picture.

(click on chart for a sharper image)
In fact 7 out of 8 BBB rated indices tracked by have hit new lows. Click here to check it out for yourself.