Downgrades in Q303 were down sharply from Q103, with the exception of CDOs and equipment leases, according to Moody's Investors Service, which is expected to release these findings in its report detailing upgrade/downgrade activity for the third quarter. The report is due out in the coming days.

Decreased downgrade activity of asset-backed securities was reflected via 212 downgrades in all, compared with 792 and 709 downgrades in the first and second quarters of 2003, respectively. The $9.5 billion represented by the 212 downgrades contrasted sharply with the 36 upgrades for the quarter, which represented $700 million. However, Moody's analysts noted the rash of downgrade activity in Q103 was derived mostly from rating actions taken against tobacco settlement-related securitizations. Taking that into account, analysts found that by excluding tobacco-related transactions, the number of downgrades in Q303 still declined compared with the levels seen in the first half of the year.

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