A LITTLE MORE ON THE ABX.HE INDEX

With costs like this, no wonder no one wants to insure against loss. Note that this came out last February and since then, some of the lower rated ABX.HE indices are less than 20!


Subprime mortgage derivatives index plunges
Bankruptcies, losses in subprime home loan industry spark drop
By Alistair Barr, MarketWatch
Last Update: 6:07 PM ET Feb 23, 2007


The ABX.HE index that tracks CDS on the riskiest subprime loans, rated BBB-, that were sold in the second half of 2006 fell to 69.39 on Friday, according to Markit.com, which administers the indexes. That's down from 72.71 on Thursday and 79.04 at the beginning of the week. In early February, this index was above 90.

Friday's price means that if investors wanted to buy protection against default on a notional $10 million of these loans, they would need to pay $3.061 million up front, plus a fixed 2.42% annual payment. This is a record low, and represents a spread of roughly 1,500 basis points.