Sovereigns step in as ABS funds reel

In a statement released by BNP Paribas Investment Partners, the manager cites the complete evaporation of liquidity in US securitisation, which it says has "made it impossible to value certain assets fairly regardless of their quality or credit rating".

As a result, the net assset value calculation for the funds has also been suspended, and will resume once liquidity returns to the market. The funds follow Frankfurt-Trust Asset Managment and Union Investment Management both suspending redemptions on their funds in recent weeks.

In a response to the looming liquidity crisis, the European Central Bank has announced it will make another €94.8 billion of potential liquidity available to banks left short of funding. That means the liquidity providers for funds and conduits can be reassured of their ability to secure funding for these positions.

The move reflects the Bank of Japan's commitment of ?1 trillion of financing to the Japanese market as concerns over subprime fund exposure spreads. And the US Federal Reserve has added another $12 billion through 14-day repurchases, double the amount it added last week.

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