Thursday, August 2, 2007
The sharp credit market reversal has in turn prompted a flight from risk. Stocks have slumped, especially financials, and Treasury yields have fallen. A number of credit hedge funds, carriers of the virus, have blown up around the world
The subprime virus has gone global. Starting as a localised outbreak in the US market for risky subprime mortgages, it has spread into the supposedly safer “Alt-A” tier and even into prime mortgages. Meanwhile, it has crossed into other loan species – particularly leveraged lending, where ballooning spreads have rattled the market and left banks holding big chunks of debt.