Comments on: ABX.HE.PENAA Initial List http://www.aleablog.com/abxhepenaa-initial-list/ Alea Jacta Est Wed, 20 Aug 2008 17:01:18 +0000 http://wordpress.org/?v=2.6.1 By: jck http://www.aleablog.com/abxhepenaa-initial-list/#comment-1171 jck Wed, 14 May 2008 20:25:27 +0000 http://www.aleablog.com/?p=866#comment-1171 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. 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.

]]> By: SS http://www.aleablog.com/abxhepenaa-initial-list/#comment-1170 SS Wed, 14 May 2008 17:05:09 +0000 http://www.aleablog.com/?p=866#comment-1170 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. 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.

]]> By: SS http://www.aleablog.com/abxhepenaa-initial-list/#comment-1143 SS Wed, 07 May 2008 21:04:12 +0000 http://www.aleablog.com/?p=866#comment-1143 So could we view the penultimate index as the "new" bottom AAA tranche then? Kidding aside I appreciate the guidance. So could we view the penultimate index as the “new” bottom AAA tranche then?

Kidding aside I appreciate the guidance.

]]> By: jck http://www.aleablog.com/abxhepenaa-initial-list/#comment-1140 jck Wed, 07 May 2008 16:42:36 +0000 http://www.aleablog.com/?p=866#comment-1140 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. 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.

]]> By: SS http://www.aleablog.com/abxhepenaa-initial-list/#comment-1139 SS Wed, 07 May 2008 15:15:10 +0000 http://www.aleablog.com/?p=866#comment-1139 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 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

]]> By: jck http://www.aleablog.com/abxhepenaa-initial-list/#comment-1138 jck Wed, 07 May 2008 13:16:28 +0000 http://www.aleablog.com/?p=866#comment-1138 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. 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.

]]> By: SS http://www.aleablog.com/abxhepenaa-initial-list/#comment-1137 SS Wed, 07 May 2008 11:50:44 +0000 http://www.aleablog.com/?p=866#comment-1137 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 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

]]> By: jck http://www.aleablog.com/abxhepenaa-initial-list/#comment-1136 jck Tue, 06 May 2008 21:38:40 +0000 http://www.aleablog.com/?p=866#comment-1136 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. 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.

]]> By: SS http://www.aleablog.com/abxhepenaa-initial-list/#comment-1135 SS Tue, 06 May 2008 20:15:41 +0000 http://www.aleablog.com/?p=866#comment-1135 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... 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…

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