Monday, July 16, 2007
I'm on the same topic again, the state of the mortgage backed security market as represented by the ABX indices. Ok, I missed the stock market prediction last week. Oops.
But look at the A rated ABX index. Please note, a new Y axis versus last week. The close was 69.35 (not updated on the graph headings until the next day). My last post had this at 81.5 cents on the dollar. In round numbers, A rated CMBS bonds dropped 15% in one week. OUCH!
Every tranch of CMBS is falling fast. AAA rated went from 97.31 to 95.53 today. (OUCH! Those bonds have poor yields due to their "safety.") BBB and BBB- are trading below 50 cents on the dollar. Must suck to have an investment like that hedged. Let's see... 6 times a 50% loss is... Ummm... officer, *that* Mr. Smith is over there (broker bolts for exit).
Anyone who says we haven't seen the darkest days hasn't contemplated what it will be like to get a mortgage come September 1st. Oh... the impact will be less than I imagine... The implode-o-meter will not stay stuck at 99 for very long. ;)