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

To: Wyätt Gwyön who wrote (79358)	2/27/2007 9:24:45 AM
From: orkrious	Read Replies (3) \| Respond to of 110194

only a few chinks yet in the ABX.HE.AAA these tranches work differently than most people think. it's not that one group of mortgages is more highly rated than another. the losses in a mortgage pool are layered the BBB- tranche gets the first 20% of the losses in a pool of mortgages BBB get the next 20% A gets the middle 20% AA get the next 20% and AAA gets the top 20%. Just the fact that the AAAs are starting to weaken means that the market realizes that there is a possibility that the first 80% in a pool are all going to be bad. When that happens the market will be in meltdown mode.