Second leg down for ABX

From the NY Times:

Slumping Confidence in Bonds Tied to Subprime Mortgages

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.

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6 Responses to Second leg down for ABX

  1. crossroads says:

    not quite sure how this works but is there aan alt-a index as well. if so how is it holding up?
    a couple months back I was reading sub prime was spreading to alt-a that seems to have disappeared. anyone have knowledge on this.

    are the rash of foreclosures contained to subprime?

  2. 7 States With Delinquency Problems
    By David Lee Smith June 15, 2007

    On Thursday, the Mortgage Bankers Association released its home foreclosure and mortgage delinquency statistics for the first quarter. Somewhat surprisingly, were it not for just three states — Ohio, Michigan, and Indiana — the rate of loans in foreclosure would have been below the nation’s average rate for the past decade.

    According to the MBA, “While Ohio, Indiana, and Michigan account for 8.7% of the mortgage loans in the country, those three states account for 19.9% of the nation’s loans in foreclosure and 15.0% of all the foreclosures started in the country during the first quarter.” But without those states, which have been hit hard by reductions in manufacturing jobs, the percentage of loans in foreclosure would have been 1.12%, versus 1.19% during the past 10 years.

    As a Texan, I find it particularly sobering to note that the foreclosures and foreclosure starts are above the rates in the Lone Star State in the 1980s during the oil bust. And the difficulties in the three Midwest states extend across all loan types.

    The rate of total foreclosures initiated in the quarter was heavily influenced by jumps in four states: California, Nevada, Arizona, and Florida. Without those states, foreclosure starts would have declined nationwide. The MBA blames the high foreclosure starts in those states on the prevalence of speculators, who have been more likely than owner-occupants to walk away from properties whose values have fallen.

    While I’m somewhat surprised by the mortgage bankers’ trends and statistics, and without taking any comfort in the difficulties of others, I believe that the breakdown demonstrates that a housing recovery is likely to be region by region. Major builders like Pulte (NYSE: PHM), Ryland (NYSE: RYL), Beazer (NYSE: BZH), KB Home (NYSE: KBH), and Toll Brothers (NYSE: TOL) operate across wide swaths of the nation. Over time, they likely will be able to emerge slowly from their quicksand by intensifying their commitments of assets to stronger markets and reducing them in weaker ones.

    Clearly, housing’s widespread overall recovery isn’t imminent, especially because the seven states mentioned above aren’t trivial if we’re to return to the health of the recent past. But at the same time, that very faint light out there may not actually be a train coming toward us.

  3. Faux News Debate on home prices !!!

    watch this one =>

    Man, gotta love the one guy who says home prices are gonna soar 10% in the next year get punked by Schiff.

    Just shows that there is still a lot of ignorance and denial out there.

    Man, this stuff will be funny to re-look at in five years….

  4. GJV1 says:

    Post #1

    Here is the ABX site. You can track all
    the indexs there.

  5. HOUSE OF CARDS says:

    Cracking Down! appraisers and mortgage brokers accountable for the shady dealings

    watch this:

    Cracking Down!

    Ohio Attorney General Marc Dann discusses his intention to hold Ohio appraisers and mortgage brokers accountable for the shady dealings that became all too common during the historic housing run-up. Next up… WallStreet!

    Originally aired on: 6/7/2007 on Bloomberg

    Running Time: 4 minutes 6 seconds

  6. HOUSE OF CARDS says:

    A ‘Subprime’ Fund Is on the Brink
    June 16, 2007; Page B1

    Concerned that an internal hedge fund at Bear Stearns Cos. wouldn’t be able to meet a margin call, Merrill Lynch & Co., one of the fund’s biggest lenders, seized $400 million of its assets and is preparing to auction them off.

    The auction, in the coming week, could trigger the fund’s dissolution — the second blowup in recent months of a hedge fund that made dicey bets on the market for risky home loans, known as subprime mortgages.

    read more:

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