ABX Indices stuck @ lows

Discussion in 'Trading' started by Cdntrader, Aug 24, 2007.

  1. Well the AAA AA's are holding up but the rest is hitting new lows. Looks like it will take clear signs of a bottom in housing/foreclosure #'s to get ppl to buy the real garbage.
    #51     Apr 21, 2008

  2. 9 months and counting...ABX indices mostly @ all time lows except for AAA's and the odd AA.
    #52     May 1, 2008

  3. another week , more new lows. AA's really taking it this week.
    #53     May 7, 2008
  4. I appreciate you keeping this up to date, thank you.
    #54     May 7, 2008
  5. Banks Start New ABX Contracts to Value Subprime Debt Better

    By Jody Shenn and Sarah Mulholland

    May 14 (Bloomberg) -- Securities firms are creating new ABX derivative contracts that will help value their holdings of some AAA rated subprime-mortgage debt.

    The ABX contracts trading for the first time today are tied to subprime bonds that are a class one step higher than those in existing indexes, according to administrator Markit Group Ltd.

    The index contracts from banks including Goldman Sachs Group Inc. and Deutsche Bank AG may provide benchmarks for a wider range of debt that has contributed to more than $335 billion in writedowns at financial firms. The contracts also may boost trading in similar bonds by making it easier for investors and traders to hedge what they own, according to Barclays Capital.

    ``It makes sense for the Street to create a vehicle to hedge these securities,'' said Dan Nigro, who helps oversee $5 billion as a portfolio manager at New York-based Dynamic Credit Partners.

    Four versions of the ABX.HE.PENAAA contracts, each tied to different six-month periods, have been created. These contracts are tied to subprime bonds that are the second-to-last of those with initial AAA ratings to receive principal payments. They join indexes tied to bonds initially granted AAA rankings that are last in line to be repaid.

    The ABX.HE.PENAAA tied to bonds from the first half of 2007, which requires the same 0.18 percentage point of annual protection payments as the existing ABX.HE.AAA, opened at a mid- price of 65.5, according to a note to clients from Lehman Brothers Holdings Inc. That translates to an upfront payment of $355,000 per $10 million of bonds and $18,000 in annual costs.

    Misleading Information

    Some holders of subprime-loan bonds such as Freddie Mac, the second-largest U.S. mortgage-finance company, have said the existing AAA ABX contracts provide investors with misleading information about the value of their assets. Those contracts are tied to the smallest portion of originally top-rated debt created by slicing pools of subprime loans into bonds.

    The new contracts may be unlikelier to be used by so-called macro hedge funds to bet against the U.S. housing market because they're tied to less risky debt, New York-based Barclays analysts Glenn Boyd and Joseph Astorina wrote in a May 6 report.

    That means they may not face the ``selling pressure'' that has helped drive down other ABX contracts further than may be justified by a surge in U.S. foreclosures, they said.

    New series of ABX indexes were created every six months by securities firms and London-based Markit until the end of last year, when plunging issuance prevented a new round. They indicate prices for credit-default swaps linked to 20 bonds. Credit- default swaps, contracts to protect against or speculate on default, pay the buyer face value if a company fails to adhere to its debt agreements.

    The latest ABX contracts linked to initially AAA subprime bonds that are the last to be repaid closed yesterday at 55.99, up 10.5 percent from their low, according to Markit. Similar contracts linked to BBB- bonds closed at 8.09, off 2 percent from a low. The indexes tumbled last year from at or near 100 as investors bet rising defaults on home loans would continue. Contracts linked to the last AAA securities from the second half of 2005, closed at 93.78, up 11.4 percent from a low.

    To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net; Sarah Mulholland in New York at smulholland3@bloomberg.net

    Last Updated: May 14, 2008 11:08 EDT
    #55     May 14, 2008
  6. 10 months and counting...ABX indices mostly @ all time lows except for AAA's and the odd AA.

    how can BBB's be worth 4.80-5 cents on the dollar!!???

    are these homes made of toothpicks?
    #56     Jun 4, 2008
  7. Mortgage Bonds Resume Stumble; Some Debt Nears Lows

    By Jody Shenn

    June 10 (Bloomberg) -- Some of the U.S. mortgage bonds at the center of the yearlong credit crisis are slipping toward new lows, as climbing gas prices, unemployment and interest rates deepen concern that homeowner defaults will increase.

    The benchmark Markit ABX index linked to the last-to-be- repaid of originally AAA rated subprime-mortgage bonds from the first half of 2007 fell this afternoon to a mid-price of 50.75, according to a note to clients from RBS Greenwich Capital, from almost 60 on May 19. Top-rated bonds of ``option'' adjustable- rate mortgages are also dropping, Greenwich, Connecticut-based RBS Greenwich analysts said in a report yesterday.

    Crude oil set a record last week as a report showed the unemployment rate rose in May by the most in more than two decades, signaling more financial woes for consumers. This week, Federal Reserve Chairman Ben S. Bernanke pledged to ``strongly resist'' any waning of confidence in stable prices, pushing up Treasury yields and mortgage rates and potentially prolonging the housing slump.

    ``There's a tremendous amount of extraneous events going on away from the mortgage market that are making people scared,'' said David Castillo, a senior trader at Further Lane Securities in San Francisco. ``Market activity over the last two weeks is down significantly over the previous four weeks.''

    Non-agency mortgage bonds, the type that have experienced unprecedented downgrades and price declines since mid-2007, lack guarantees from government-chartered Fannie Mae and Freddie Mac, or federal agency Ginnie Mae. The market totaled $2.1 trillion on March 31, excluding derivative exposures, according to Fed data.

    May Rally

    The debt, along with other credit markets, had generally rallied through mid-May after the Fed backed the bailout of Bear Stearns Cos. and began lending directly to investment banks in March, signaling the central bank's willingness to prevent bank failures and easing a logjam in debt markets. Markets have since reversed, as banks and securities firms including Lehman Brothers Holdings Inc. report fresh losses.

    The average yield over swap rates on the safest types of AAA U.S. commercial-mortgage securities rose yesterday to 1.57 percentage points, up from as low as 1.28 percentage points last month and down from a record high of 3.12 percentage points in March, according to a Bank of America Corp. index. The difference between yields on the Bloomberg index for Fannie Mae's current-coupon, 30-year fixed-rate mortgage bonds and 10-year government notes touched the highest since March yesterday.

    Investor Demand

    The average yield over similar-duration Treasuries on AAA securities backed by subprime or second mortgages was at 6.23 percentage points yesterday, the highest since the last week of April, according to Lehman Brothers index data. The spread rose as high as 7.52 percentage points on May 9, according the New York-based securities firm's index.

    Renewed investor demand remains strong for the types of AAA rated subprime-mortgage bonds that are the first to repaid with principal returned from the underlying loans, ``with little price discovery in other tranche types,'' according to a report yesterday from Countrywide Financial Corp. analysts including Anand Bhattacharya and Bill Berliner.

    Subprime Index

    The ABX-HE-AAA 07-2 subprime index fell as low as 50.67 in March, suggesting similar prices for similar bonds, and remains above its end of March close. New ABX sub-indexes created last month and linked to the second-to-last-to-be-repaid AAA classes have fallen to record lows for each six-month ABX series, with the latest declining from a high of 70 to 59.25 yesterday.

    ABX indexes indicate prices for credit-default swaps linked to 20 bonds. The credit-default swaps offer protection if the securities aren't repaid as expected, in return for regular insurance-like premiums. The indexes tumbled last year from at or near 100 as investors bet defaults on home loans would rise.

    So-called super-senior, or the safest, floating-rate bonds from 2006 and 2007 backed by option ARMs, whose minimum payments create growing loan balances, slipped last week to 73 cents to 78 cents for each dollar of principal, according to a report yesterday by RBS Greenwich strategists Desmond Macauley and Joseph Ruszkowski. More-junior AAA classes were at 60 cents to 65 cents, they wrote, while similar securities from 2005 were in the ``low 80s.''

    In mid-March, super-senior option ARM securities typically were trading at about 78 cents, while more-junior AAA classes were at 55 to 68 cents, according to UBS AG analyst estimates at the time.
    #57     Jun 10, 2008
  8. 11 months and counting ...ABX indices all @ lows. AAA's falling hard over last month.
    #58     Jul 10, 2008
  9. I've been paying attention to that and today after FRE and FNM news came out, it was just a straight 90 degrees drop. Geeezz..... That is nasty.
    #59     Jul 10, 2008
  10. 1 yr anniversary and....upticks! mostly in AAA's though.
    #60     Jul 30, 2008