Monday, July 2, 2007

A Bear Bit Them

Troubles are back in CDO-land and the various indexes tracking credit default swaps for mortgage securities are all making fresh new lows. You can follow all the charts at Markit - here are just a few.

This one tracks residential mortgages, the tranches with BBB- ratings. Collapse is a fair description.
But the better quality A rated stuff is taking it on the chin, too.
Things are not much better on the commercial mortgage side.

These charts are inverted because they track yield spreads, so the higher they go the worse things are. Merely for comparison purposes I have included charts for the same ratings as above.
The reasons for this new debacle are easily found by reading the financial press. A certain investment bank, highly involved in the issuance and trading of mortgage-backed securities, is presently living up to the first part of its name.

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