DJ HIgher-Rated Slices Of The ABX Derivative Index Fall Sharply
.
By Anusha Shrivastava
Of DOW JONES NEWSWIRES
NEW YORK(Dow Jones)--The higher-rated slices of the ABX indexes fell sharply Thursday on continued concerns about subprime problems.
While the riskiest slices of the indexes have been under pressure for several weeks now, market participants had said they expected the better-rated rungs of the index not to succumb as easily to pressure from investors seeking credit protection. The price of the index falls when investors buy protection against losses due to delinquencies and defaults on home loans.
The AAA-rated tranche of the ABX index based on loans from the second half of 2006 is down to 89.5 points from 92 points on Wednesday, according to a primary dealer.
"The market is very skittish," said Norman Cerk, partner at hedge fund Balestra Capital in Chicago. "The upper tranches are down more than the lower tranches," he said
The AA-rated slice of the index based on loans from the second half of 2006 is quoted at 71 cents, down from its close of 77 cents on Wednesday, according to Derrick Wulf of Dwight Asset Management. Its counterpart from the previous index is quoted at 80 cents, also down from a close of 86 cents.
Liquidity is "not that good," Wulf said.
The ABX indexes act as a barometer of investor's opinions on the potential performance of subprime loans.
The riskiest BBB-minus tranche for the ABX index based on second half 2006 home loans stood at 38 cents, virtually unchanged from Wednesday. This rung of the ABX has suffered the most as a result of the deterioration of subprime mortgages, but in recent weeks the upper reaches of the index have come under pressure.
-By Anusha Shrivastava, Dow Jones Newswires; 201-938-2371; anusha.shrivastava@dowjones.com
(END) Dow Jones Newswires
August 02, 2007 15:07 ET (19:07 GMT)
Copyright (c) 2007 Dow Jones & Company, Inc.- - 03 07 PM EDT 08-02-07 |
