Subprime-Based Derivative ABX Index Falls Below 50 Cents
Last update: 7/11/2007 4:29:08 PM
By Anusha Shrivastava
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The riskiest, BBB-minus tranche of the subprime-based derivative index, known as the ABX, fell below 50 cents on the dollar for the first time amid heavy trade Wednesday as concerns about subprime loan contagion deepened.
The index traded at 49 cents in late trade, according to Alex Pritchartt, a trader at UBS. On Tuesday, it had hit a low of 50 cents before moving up to 52 cents on the dollar.
"There are people out there who think it's worth zero," said Derrick Wulf, portfolio manager at Dwight Asset Management.
"There are also people who think it is worth much more."
Andrew Lahde, managing partner of Lahde Capital Management, a hedge fund in Santa Monica, Calif. which trades the index, is among those who believes the index will slip even more.
"It will deteriorate further," he said. "Even the single-As of the current index will go down." The current bout of jitters started Tuesday after Standard & Poor's said it expects to downgrade the majority of the 612 classes of mortgage-backed securities it put under review. Moody's Investors Service later Tuesday downgraded 399 subprime residential mortgage-backed securities issued in 2006. Moody's said in a release that 32 additional securities were placed on review for possible downgrade.
The current index is based on loans made in the second half of 2006, a year known for its lax lending standards.
-By Anusha Shrivastava, Dow Jones Newswires; 201-938-2371; anusha.shrivastava@dowjones.com
(END) Dow Jones Newswires
July 11, 2007 16:29 ET (20:29 GMT) |
