ABX update: fundamentals push to new lows

Discussion in 'Economics' started by ASusilovic, Feb 27, 2008.

  1. The world’s two largest monolines may have been hoiked briefly back from the brink, but fundamentally, the problem behind this whole mess is still getting worse.

    Here’s the latest graph (close Tuesday) AAA 07-2 series of the ABX - an index covering asset-backed subprime securities:


    Whether you trust the implied value given by the index or not (62 cents on the dollar), it’s still used widely as the best, nay only, mark-to-model proxy for CDO pricing and such like by banks. It has indeed been a consistent refrain from bulls that the ABX is unreliable in such illiquid times.

    Calculated Risk, however, states that the current lows are being driven by fundamentals - specifically, the latest round of ABX remittance data, which details losses, delinquencies et cetera on underlying collateral.

    Either way, more downgrades on CDOs seem certain