Moody's looks to SIVs for stability

In a report released today, Moody's has described structured investment vehicles (SIV) as inherently stable in the face of spreading unrest in the US subprime mortgage market.

The report says that SIVs have conducted re-underwriting exercises across their portfolios to identify the level of their subprime exposure. As a result, the sector as a whole has 23% exposure to residential mortgage-backed securities (RMBS) globally, around half of which is in the US.

The exposure to subprime RMBS in most cases is through AAA and AA-rated tranches, although some SIVs are exposed indirectly through collateralised debt obligations (CDO) of asset-backed securities, with total exposure to those assets at 11%.

SIV-lites – hybrids of SIV and CDO technology – are far more exposed to RMBS, at 96%.

Although the report points out that mark-to-market impact on the vehicles is limited, net asset values for SIV-lites averages 95.4%, down from 100% in March this year. SIVs, on the other hand, are nearing par from a high of 105% in July 2005.

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