Bookmark this site
April 28 (Bloomberg) — Wall Street banks began taking bets on pools of jumbo-mortgage bonds as trading started today on four new credit-default-swap indexes.
The PrimeX indexes, administered by London-based Markit Group Ltd., are similar to the ABX indexes tied to subprime debt that began in early 2006, allowing easier wagers on the subsequent record defaults among homeowners with bad credit.
When a plan to create the indexes linked to older prime loans larger than the limits for government-supported Fannie Mae and Freddie Mac was announced in December, Wells Fargo & Co. analyst Glenn Schultz suggested investors consider selling jumbo-mortgage securities because PrimeX trading could drive down their prices, as happened with subprime bonds and the ABX indexes he had called “Frankenstein’s monster.”
Read more from BusinessWeek
