Wednesday, Jun 20, 2007
WAIT FOR THE FALLOUT ACROSS THE MARKET
FT.com: Subprime mortgage securities
One hunch is that a chunk of the losses are sitting in collateralised debt obligations, which repackage loans into securities. These are split into tranches, with those that will absorb the first hit dubbed equity, while the safest portions can be rated triple-A. But in CDOs, even triple-A securities can trip up investors if the riskier tranches are undermined by weak underlying collateral.
Posted by out of control speculators @ 11:28 PM (165 views) Add Comment
3 Comments
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1. Orwell said...
The value of securities backed by subprime mortgages has been in precipitous decline. The losses, though hard to quantify, must run into tens of billions of dollars. But who is hurting?
GOOD QUESTION....
WE DON'T KNOW YET ANY OF US INCLUDING SWERVE BECAUSE NEITHER HE NOR MOST OF THE CITY KNOW WHICH HEDGE FUNDS THIS DEBT HAS GONE IN AND OUT OF ...
OH WORRYING DAYS INDEED....
2. Realist said...
This Bear Stearns fund collapse could be the first domino to fall in terms of the wider fall-out of the subprime crisis in the US. With the levels of foreclosures going on over there, it was always rather barmy to suggest that this problem had somehow been "contained" and after a period of holding tight with mortgage backed securities, a few skeletons are starting to come out of the closet. Moody's (as ever reacting to a problem when it becomes bleedigly obvious to everyone) downgraded a load of these deals last week which will put pressure on holders to do something ie try to sell or adjust valuations. More to come on this front I think.
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