From the NY Times:
A series of indexes that gauge investor confidence in subprime mortgage bonds dropped sharply this week and neared the pessimistic levels that they last sank to in late February when several large lenders collapsed.
The drop appears to have been driven by the recent surge in Treasury yields, a sizable liquidation of bonds by hedge funds, and by rising delinquencies in home loans to people with weak, or subprime credit. And it suggests that the once-booming market for securitized mortgages is far from hitting bottom.
The index series, ABX, measures the implied cost of insuring investments in 20 bonds and does not directly measure the price of the securities, which are traded relatively infrequently by a small group of sophisticated players. The ultimate holders of these bonds, which are essentially a stake in loans taken out by thousands of individual homeowners, are pension funds, hedge funds, insurance companies and other institutional investors.
As of the end of trading yesterday, the index that tracks the portions rated BBB- of 20 bonds issued in late 2006 was down 7 percent, according to the Markit Group and CDS IndexCo, which created and maintain the ABX. That means it would cost an investor $2,052.88 to insure $10,000 worth of bonds, up from $1,790.28 a week earlier.