Subprime mortgages trigger ABX sell-off
Investors in the subprime mortgage sector might have been expecting some kind of market correction after a jump in delinquency rates at the back end of 2006. What they weren't expecting was a full-scale stampede out of the ABX index. Credit reports
The 'other shoe' finally dropped in the US subprime mortgage market in February as a crop of lenders closed shop and major banks revealed they are expecting serious losses in their loan portfolios.
The market had been expecting weakness in the sector this year after delinquency rates on subprime mortgages reached record levels towards the end of 2006. Nonetheless when the latest news hit the market, the impact - most closely felt on ABS derivatives index the ABX - was nothing short of astounding
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