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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Perspective who wrote (37529)	8/2/2005 2:27:08 AM
From: J_Locke	Read Replies (1) \| Respond to of 110194

I assume that the hedgies and the trading desks at the money center banks are pretty much the only consumers of the lowest rated mortgage garbage; but some pension funds and insurers may be dabbling in the junkier stuff too. This Fitch report spells out how dependant mortgage sector structured finance has become on the hedge funds. If (when) home loan default rates begin to rise, the whole credit complex will seize up. <<Additionally, key segments of the structured finance markets, such as subprime RMBS and CDOs, are reliant on hedge funds as the source of risk capital. If this capital were to recede, it is likely that yields would widen and a dropoff in structured finance issuance could ensue, at least until alternative investor classes entered the market, which has happened in the past. Depending on the depth and duration of any dislocation, there could be a ripple effect on the consumer and the broader economy.>> securitization.net