By noon, spreads on the five-year iTraxx Crossover Index of 50 sub-investment grade credit default swaps had narrowed to 309 basis points, down from 326 at close the previous day.
On August 22, Bank of America bought $2 billion of non-voting preferred stock in Countrywide, which has been hit hard by problems in the US subprime mortgage sector. The securities carry an annual yield of 7.25% and can be converted into common stock in the company for $18 a share. Bank of America said it hoped the move would be “a step toward a return to more normal liquidity in the mortgage markets”.
Previously on Risk News: Subprime rating actions spark EC review of agencies
Japanese banks suffering from subprime crisis