ABX Indices stuck @ lows
- Thread starter Cdntrader
- Start date
March 11 â Bloomberg (Mark Pittman): âEven after downgrading almost 10,000 subprime-mortgage bonds, Standard & Poorâs and Moodyâs⦠havenât cut the ones that matter most: AAA securities that are the mainstays of bank and insurance company investments. None of the 80 AAA securities in ABX indexes that track subprime bonds meet the criteria S&P had even before it toughened ratings standards in February, according to data compiled by Bloomberg. A bond sold by Deutsche Bank AG in May 2006 is AAA at both companies even though 43% of the underlying mortgages are delinquent. Sticking to the rules would strip at least $120 billion in bonds of their AAA statusâ¦. âThe fact that theyâve kept those ratings where they are is laughable,â said Kyle Bass, chief executive officer of Hayman Capital Partners⦠âDowngrades of AAA and AA bonds are imminent, and theyâre going to be significant.ââ
The ratings won't matter as by the time they downgrade the Fed will have bought all that toxic paper, then the banks can all increase their earning projections based on the Feds writedowns according to the bizare new accounting rules (see how LEH jacked up its earnings last quarter using these rules).
http://www.portfolio.com/news-markets/top-5/2008/03/20/Lehmans-Debt-Shuffle
http://www.portfolio.com/news-markets/top-5/2008/03/20/Lehmans-Debt-Shuffle
Having trouble understanding why the 06-1 AAA index is at 89, while the AAA 07-1 index is at 57.
My logic is that '06 loans have a similar probability of default as '07 loans do. Can someone explain what I'm missing?
My logic is that '06 loans have a similar probability of default as '07 loans do. Can someone explain what I'm missing?
Quote from Cdntrader:
Another week and well basically @ the lows or fading back that way.
Not much bang for the buck err.. 800 billion bucks
well well we have....buyers! AAA's AA's definitely on the move HIGHER. I guess all the free money and new bogus accounting free-for-all rules DO account for something lol
hell we may even see reversals on some of these writedowns.
Commercial-, Home-Mortgage Bonds Plunge in Quarter (Update1)
By Jody Shenn
April 1 (Bloomberg) -- Securities backed by U.S. commercial mortgages and home loans to better-than-subprime borrowers dropped the most ever last quarter, as the credit-market slump deepened amid growing losses at financial companies.
AA rated commercial-mortgage securities tumbled 18 percent and A rated bonds fell 22 percent in the period through March 31, according to Lehman Brothers Holdings Inc. index data. Top-rated debt declined 2.1 percent, including interest payments. Some AAA rated home-mortgage bonds dropped to $65 per $100 of principal, according to a Barclays Capital report yesterday.
Mortgage bonds extended declines during the period as banks and securities firms with ``bloated balance sheets'' tightened terms on lending against the debt, forcing some investment funds to sell holdings, according to Barclays. <b>Losses were pared in late March for some bonds as lower prices attracted buyers and the Federal Reserve moved to shore up credit markets.
``One investor's pain is another one's gain,'' the New York- based Barclays analysts led by Ajay Rajadhyaksha wrote. ``The forced liquidations for leveraged accounts have presented real money with unprecedented opportunities.'' </b>
Some non-agency U.S. home-loan bonds offer yields of 10 percent to 20 percent even when assuming ``severe'' losses on underlying loans, they wrote. Non-agency mortgage bonds lack guarantees from government-linked entities such as Washington- based Fannie Mae. The market for such home-loan bonds totals about $2.1 trillion, according to Fed data. Such commercial- mortgage securities total about $750 billion.
AAA Bonds
Prices for some subprime AAA bonds fell to about $52 per $100 of principal yesterday, from about $70 at the start of 2008, a Markit ABX index indicates. That debt, created in the first half of 2007, would be the last among AAA rated bonds to be repaid. Subprime loans are given to people with poor credit.
Some collateralized debt obligations used to repackage subprime bonds into new debt have offered no payments to junior AAA investors in liquidations, according to Standard & Poor's.
The second-most-senior AAA rated bonds created last year out of a pool of home loans with potentially growing balances by Countrywide Financial Corp. can be bought for about $65 per $100 of principal, according to the Barclays report yesterday.
Writedowns
Banks and financial companies have recorded more than $230 billion in writedowns and credit losses from the slump in credit markets that began with a slide in subprime-mortgage securities. Foreclosures in the U.S. are at the highest on record. UBS AG and Deutsche Bank AG, two of Europe's biggest banks, today reported a combined 14.5 billion euros ($15.8 billion) of losses on loans and securities, including commercial-property debt and so-called Alt-A home-mortgage securities.
Deutsche Bank said in a statement that markdowns on assets backed by residential mortgages ``principally'' involve 7.91 billion euros of so-called Alt-A mortgages, which fall between subprime and prime. UBS said Alt-A holdings fell from $26.6 billion to about $16 billion, after writedowns and sales.
AAA rated commercial-mortgage securities returned 2.81 percent in March, while AA securities lost 2.47 percent, according to Lehman Brothers data. The most-senior AAA securities from the Countrywide deal backed by option adjustable-rate mortgages probably could be bought for about $78 per $100 of face value, according to Barclays. The securities were issued at or near par, or face value, in June.
Minimum Payments
Option ARMs' minimum payments fail to cover the interest that borrowers owe. Lenders made Alt-A loans to borrowers who wanted atypical terms such as these loans, proof-of-income waivers, or investment-property collateral, without sufficient compensating attributes including larger down payments.
The Fed last month began offering short-term loans to investment banks after the collapse of Bear Stearns Cos., the second-largest underwriter of mortgage bonds and one of the most- active traders, along with offering to temporarily swap Treasuries for debt including top-rated non-agency home-loan bonds and commercial-mortgage securities.
``Spurred by initiatives by the Fed,'' some investors reduced bets that commercial-mortgage debt would cheapen involving contracts tied to Markit CMBX indexes, said Alan Todd, head of CMBS research at JPMorgan Chase & Co. The back-pedaling contributed to rising prices for related bonds, he said.
Agency mortgage securities returned 2.4 percent last quarter, according to Lehman Brothers data, recovering after yields over 10-year Treasuries hit 22-year highs last month.
Credit Cards
Yields over benchmarks demanded by investors on many types of top-rated asset-backed securities rose for a fifth straight month, hitting records, according to Deutsche Bank data.
Three-year floating-rate credit-card securities entered this week typically yielding 1.05 percentage points more, up from 0.40 percentage points in the first week of the year, according to the data. Spreads on three-year auto-loan securities rose to 1.80 percentage points, up from 0.75 percentage points.
Some big money managers, banks and insurance companies have been looking to buy consumer-related asset-backed securities ``and there's a lot of new money coming in from hedge funds that didn't participate in the past in the product'' according to Chip Wheeler, a trader at New York-based Seaport Group LLC.
``I think the buying interest now is a lot better than it was late last year,'' Wheeler, who left Bank of America Corp. to join Seaport this month, said in an interview last week. Most of the interest is from U.S.-based buyers, he said.
By Jody Shenn
April 1 (Bloomberg) -- Securities backed by U.S. commercial mortgages and home loans to better-than-subprime borrowers dropped the most ever last quarter, as the credit-market slump deepened amid growing losses at financial companies.
AA rated commercial-mortgage securities tumbled 18 percent and A rated bonds fell 22 percent in the period through March 31, according to Lehman Brothers Holdings Inc. index data. Top-rated debt declined 2.1 percent, including interest payments. Some AAA rated home-mortgage bonds dropped to $65 per $100 of principal, according to a Barclays Capital report yesterday.
Mortgage bonds extended declines during the period as banks and securities firms with ``bloated balance sheets'' tightened terms on lending against the debt, forcing some investment funds to sell holdings, according to Barclays. <b>Losses were pared in late March for some bonds as lower prices attracted buyers and the Federal Reserve moved to shore up credit markets.
``One investor's pain is another one's gain,'' the New York- based Barclays analysts led by Ajay Rajadhyaksha wrote. ``The forced liquidations for leveraged accounts have presented real money with unprecedented opportunities.'' </b>
Some non-agency U.S. home-loan bonds offer yields of 10 percent to 20 percent even when assuming ``severe'' losses on underlying loans, they wrote. Non-agency mortgage bonds lack guarantees from government-linked entities such as Washington- based Fannie Mae. The market for such home-loan bonds totals about $2.1 trillion, according to Fed data. Such commercial- mortgage securities total about $750 billion.
AAA Bonds
Prices for some subprime AAA bonds fell to about $52 per $100 of principal yesterday, from about $70 at the start of 2008, a Markit ABX index indicates. That debt, created in the first half of 2007, would be the last among AAA rated bonds to be repaid. Subprime loans are given to people with poor credit.
Some collateralized debt obligations used to repackage subprime bonds into new debt have offered no payments to junior AAA investors in liquidations, according to Standard & Poor's.
The second-most-senior AAA rated bonds created last year out of a pool of home loans with potentially growing balances by Countrywide Financial Corp. can be bought for about $65 per $100 of principal, according to the Barclays report yesterday.
Writedowns
Banks and financial companies have recorded more than $230 billion in writedowns and credit losses from the slump in credit markets that began with a slide in subprime-mortgage securities. Foreclosures in the U.S. are at the highest on record. UBS AG and Deutsche Bank AG, two of Europe's biggest banks, today reported a combined 14.5 billion euros ($15.8 billion) of losses on loans and securities, including commercial-property debt and so-called Alt-A home-mortgage securities.
Deutsche Bank said in a statement that markdowns on assets backed by residential mortgages ``principally'' involve 7.91 billion euros of so-called Alt-A mortgages, which fall between subprime and prime. UBS said Alt-A holdings fell from $26.6 billion to about $16 billion, after writedowns and sales.
AAA rated commercial-mortgage securities returned 2.81 percent in March, while AA securities lost 2.47 percent, according to Lehman Brothers data. The most-senior AAA securities from the Countrywide deal backed by option adjustable-rate mortgages probably could be bought for about $78 per $100 of face value, according to Barclays. The securities were issued at or near par, or face value, in June.
Minimum Payments
Option ARMs' minimum payments fail to cover the interest that borrowers owe. Lenders made Alt-A loans to borrowers who wanted atypical terms such as these loans, proof-of-income waivers, or investment-property collateral, without sufficient compensating attributes including larger down payments.
The Fed last month began offering short-term loans to investment banks after the collapse of Bear Stearns Cos., the second-largest underwriter of mortgage bonds and one of the most- active traders, along with offering to temporarily swap Treasuries for debt including top-rated non-agency home-loan bonds and commercial-mortgage securities.
``Spurred by initiatives by the Fed,'' some investors reduced bets that commercial-mortgage debt would cheapen involving contracts tied to Markit CMBX indexes, said Alan Todd, head of CMBS research at JPMorgan Chase & Co. The back-pedaling contributed to rising prices for related bonds, he said.
Agency mortgage securities returned 2.4 percent last quarter, according to Lehman Brothers data, recovering after yields over 10-year Treasuries hit 22-year highs last month.
Credit Cards
Yields over benchmarks demanded by investors on many types of top-rated asset-backed securities rose for a fifth straight month, hitting records, according to Deutsche Bank data.
Three-year floating-rate credit-card securities entered this week typically yielding 1.05 percentage points more, up from 0.40 percentage points in the first week of the year, according to the data. Spreads on three-year auto-loan securities rose to 1.80 percentage points, up from 0.75 percentage points.
Some big money managers, banks and insurance companies have been looking to buy consumer-related asset-backed securities ``and there's a lot of new money coming in from hedge funds that didn't participate in the past in the product'' according to Chip Wheeler, a trader at New York-based Seaport Group LLC.
``I think the buying interest now is a lot better than it was late last year,'' Wheeler, who left Bank of America Corp. to join Seaport this month, said in an interview last week. Most of the interest is from U.S.-based buyers, he said.