ABX.HE.PENAAA 06-1 Initial List
Here is a list of current factors for the 06-1 serie. ( 1- FACTOR ) is what has been paid back.
One deal, J.P. MORGAN MORTGAGE ACQUISITION CORP. 2005-OPT1, has paid back in full the top 3 AAA tranches.
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May 6th, 2008 at 3:15 pm
Sorry,
Can you provide a bit of color on this. From what I can see 4 issues have paid in full and one issue appears to have not paid at all. However, when is the final due date on these tranches.
Do you have any take away on this or is it just data…
May 6th, 2008 at 4:38 pm
ss:
What was paid back is (1-factor).
1 means no principal has been paid back on the penultimate AAA tranche.
0 means it has been paid back in full.
Usually there are 4 or 5 AAA tranches so if number 3 has been paid back in full so has number 1 and 2.
May 7th, 2008 at 6:50 am
JCK,
Thanks for clarifying that. So, if I understand it now, I can see that only one penultimate tranche has been paid back in full and 4 are hanging in the wind entirely.
Let me ask one last question to help my understanding. Is the maturity date for these securities June 1st (06-1)? That would provide plenty of color to what’s happening if so.
Thanks,
SS
May 7th, 2008 at 8:16 am
ss:
06-1 refers to the launch date of the index, the legal maturity is very long, up to 40 years, july 2045 for 06-1 to be precise, but we are dealing with mortgages and the uncertainty associated with that type of product: prepayment, defaults etc means the investor doesn’t know for certain when/if he will be paid back. It can be quick like for some AAA tranches or long or never, if the principal is wiped out by writedowns.
The fact that only one tranche has paid back in full [in less than 3 years btw] and 4 are hanging in the wind as you put it, is perfectly normal in normal times, but being an avid newspaper reader I thought we were going through some kind of disaster.
And if we are in a disaster scenario, you would expect tranches to register massive principal writedowns and not to be paid back. Yet for the ABX indices there is not a single tranche that has registered a single cent in principal writedowns not even the BBB-, so far.
May 7th, 2008 at 10:15 am
OK,
That’s clear enough. Thanks.
Not to abuse your knowledge but how would you tell from this data or the Markit site that any particular tranche was being written down? For example, I know that there has been a lot of press about the ratings agencies not marking down the ABX index from AAA — http://www.bloomberg.com/apps/news?pid=20601109&sid=aRLWzHsF16lY&refer=home
May 7th, 2008 at 11:42 am
ss:
Markit publishes monthly a file called RCD (Reference Cashflow Database) which gives the status of all tranches in the indices in terms of interest shortfalls, principal writedowns etc..there is a line for each tranche that tells you about the “principalshortfallamt” and it is 0 for all tranches.
here is a sample
http://www.markit.com/news/RCD_ABX_HE_INDEX.xml
The ratings on the ABX AAA tranches refer to the most junior AAA tranches, as mentionned earlier there are 3 or 4 tranches above that in a typical referenced RMBS, I don’t disagree that the “junior” AAA aren’t really AAA given the uncertainty about defaults and given that they are the most junior but these tranches are not representative of all AAA tranches in the referenced obligations precisely because they are junior to others, bigger tranches. Remember the ABX covers only about 15% of the underlying RMBS.
May 7th, 2008 at 4:04 pm
So could we view the penultimate index as the “new” bottom AAA tranche then?
Kidding aside I appreciate the guidance.
May 14th, 2008 at 12:05 pm
http://www.bloomberg.com/apps/news?pid=20601087&sid=ar.VSE8VXvR4&refer=home
These suckers just opened for trading. I don’t know if 65 is an expected price, a great price, or just bad news. If 100 were the baseline I’d have a hard time seeing it as good news but this isn’t my area of expertise to be sure.
May 14th, 2008 at 3:25 pm
bloomberg picked the worse one, so I will pick the best one: the 06-1 is close to par at 98.30.
Nothing new or surprising, higher seniority AAA trade better than lower ones and as I have said many times before the “old” and junior AAAs in the ABX aren’t representative of all subprime AAAs.