Subprime mortgages trigger ABX sell-off

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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