Tarp U-turn hits US structured credit market

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Outgoing US Treasury secretary Henry Paulson closed the door to US government purchases of illiquid mortgage-backed securities under the $700 billion Troubled Assets Relief Program (Tarp) on November 12. The decision had an immediate impact on the Markit ABX.HE indexes, which track credit default swaps (CDSs) referencing subprime home loans. Having already priced in the prospect of wholesale asset purchases under Tarp, the indexes experienced a sharp drop in the days following the announcement.

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