TimberX

Tyler Durden's picture

Update:

                      Cpn    Bid      Offer   Chg from Close  Factor

PrimeX.FRM.1   442    99-16  / 101-16      -2-060      0.47               
PrimeX.FRM.2   458    86-08  / 88-08       -4-020      0.49               
PrimeX.ARM.1   442    93-08  / 95-08       -3-280      0.41               
PrimeX.ARM.2   458    81-00  / 83-00       -4-040      0.44

Original:

Precisely a week ago, a fringe blog had the temerity to warn that PrimeX could very well be the next coming of Subprime (and make those who got on board early very, very rich). A week later, those who got in early may not be very, very rich... but they are richer (there is time for the very, very part), while PrimeX is the worst weekly performing fixed income product in the known universe. Today, following Jeff Gundlach's presentation to David Faber which agreed with the ZH outlook that PrimeX is substantially overpriced, the entire PrimeX rack has seen its biggest plunge yet. At this rate, by Monday even the most sturdy PrimeX FRM1 will be trading below par. At that point it is Sayonara, Sam. Oh, and for those who don't realize that European banks which are now entering asset liquidation mode, are substantially pregnant with exposure to both synthetic and unhedged cash product (recall which entities were stuck holding ABX on the wrong side of the trade back in 2007) we have one thing to say: "European banks which are now entering asset liquidation mode, are substantially pregnant with exposure to both synthetic and unhedged cash product." Have fun spinning that as a function of liquidity (which for some odd reason none of the structured and synthetic product "experts" out there appear to not realize that notional outstanding can and will soar overnight if there is sufficient client demand - a bank can write $10BN or $100BN of product in a second) when the bottom falls out. Lastly, once contagion spills out from the synthetic product to cash, have fun trying to ramp stocks to unch for the year on nothing but the most recent short covering spree. Oh, and remember: the basis trade is different this time...

The latest market blast:

                       Cpn    Bid      Offer   Chg from Close  Factor               

PrimeX.FRM.1   442    100-08 / 102-08     -1-140      0.47               
PrimeX.FRM.2   458    87-08  / 89-08       -3-020      0.49               
PrimeX.ARM.1   442    94-00  / 96-00       -3-040      0.41               
PrimeX.ARM.2   458    81-16  / 83-16       -3-200      0.44

And visually. Compare to October 7.

FRM 1

FRM 2

ARM 1

ARM 2