Moody's looks to SIVs for stability

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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