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

To: russwinter who wrote (71364)10/8/2006 11:29:05 AM
From: YanivBA  Read Replies (1) | Respond to of 110194
 
are saying that as risk, or more specifically credit quality worsens, the ABX index falls or drops?

Yes. That is my understanding of this panel:


The only confusing thing is that you have to keep track of the fact that the seller of default protection is long the bond and therefore gets paid when less defaults are expected (i.e. when ABX rises). The buyer is seeking protection therefore he is short the bond and gets paid if more defaults are expected (i.e. when ABX declines).

YanivBA



To: russwinter who wrote (71364)10/8/2006 12:25:13 PM
From: zebra4o1  Read Replies (1) | Respond to of 110194
 
ABX.HE according to James Grant:

"A falling index means that mortgage spreads are widening, a rising index that they are tightening"

What's really confusing is all the different ABX.HE indices. What is the difference between ABX-HE-BBB- 06-2 which is dropping, versus ABX-HE-BBB- 06-1 which is doing fine (I think).


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