ABX And CMBX Update: A False Bid?
With the market now down for the year, and high beta HY bonds getting blown up left and right, not every risk asset is following through in the liquidation race. Case in point: ABX and CMBX, which one can say are the worst of the worst in risk assets. The charts below of the AAA-rated tranche of the various vintages of ABX Subprime (incidentally, are any readers aware of ABX Prime markets yet? It appears after much hoopla by MarkIt, nobody is trading in the Prime version as of yet) and CMBX indicate that while there has been a notable swoon in closing prices of both ABX and CMBX, there is long way to go before either of these hit not only early 2010 levels, but their fair values, somewhere about 50% lower from current prices, which are based on nothing but continued hope of government bailouts of holders of these assets, the bulk of which are the TBTF banks themselves. Should this last recourse of the Bernanke Put mentality crash, and with even permabulls like Goldman once again turning bearish on housing, look for the broader market to start purchasing Dow 9,000 hats very soon.