Asset Backed Asphyxia
Since Dec 31st... Yields on 3 year, AAA rated credit card bonds with floating rates
rose to 75 basis points over the London interbank offered rate (LIBOR), thats up 35 bps from 40 bps at the start of the year.
Spreads over 3 year swap rates for 3 year, AAA rated fixed rate auto loan securities rose to 140 basis points, up 65 bps from 75 bps.
The average spread over U.S. Treasuries on AAA rated commercial mortgage securities climbed to 364 basis points, up 197 bps from 167bps.
Spreads for 3 year AAA bonds backed by U.S. subprime or home equity loans rose to 380 basis points, up 130 bps from 250bps.
It's become difficult, if not impossible, for investors to determine how much holdings of
mortgage MBS or asset backed ABCP bonds are worth because new issuance and trading has nearly ceased,
Just look at the chart to see the spread increase, hattip to Bloomberg
The Nattering One muses... some are hoping that this Spring will bring relief in the real estate markets,
the only thing we see springing up, aside from weeds in the lawns of more foreclosures, will be rates.
As you can see from the above, since Jan 1st,
all types of consumer based credit, including mortgages have suffered a 50 to 100% increase in spread.
In July, FNMA, FHA & FHLMC will start funding jumbo loans,
problem is, with all the Fed cuts, jumbo rates aren't going down, they've gone up.
Further, even if buyers came out of the woodwork flush with cash, few want to touch the paper, and only if the yields or risk premiums are high enough.
By July, with the service sector and employment rolling over, foreclosure rates should be well above current levels, making lenders even more risk adverse.
This financial "ebola" should drive rates higher, negating all but the hardiest of borrowers who might be refinancing, with no cash out.
rose to 75 basis points over the London interbank offered rate (LIBOR), thats up 35 bps from 40 bps at the start of the year.
Spreads over 3 year swap rates for 3 year, AAA rated fixed rate auto loan securities rose to 140 basis points, up 65 bps from 75 bps.
The average spread over U.S. Treasuries on AAA rated commercial mortgage securities climbed to 364 basis points, up 197 bps from 167bps.
Spreads for 3 year AAA bonds backed by U.S. subprime or home equity loans rose to 380 basis points, up 130 bps from 250bps.
It's become difficult, if not impossible, for investors to determine how much holdings of
mortgage MBS or asset backed ABCP bonds are worth because new issuance and trading has nearly ceased,
Just look at the chart to see the spread increase, hattip to Bloomberg
The Nattering One muses... some are hoping that this Spring will bring relief in the real estate markets,
the only thing we see springing up, aside from weeds in the lawns of more foreclosures, will be rates.
As you can see from the above, since Jan 1st,
all types of consumer based credit, including mortgages have suffered a 50 to 100% increase in spread.
In July, FNMA, FHA & FHLMC will start funding jumbo loans,
problem is, with all the Fed cuts, jumbo rates aren't going down, they've gone up.
Further, even if buyers came out of the woodwork flush with cash, few want to touch the paper, and only if the yields or risk premiums are high enough.
By July, with the service sector and employment rolling over, foreclosure rates should be well above current levels, making lenders even more risk adverse.
This financial "ebola" should drive rates higher, negating all but the hardiest of borrowers who might be refinancing, with no cash out.
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