Last week's introduction of a tradable index for synthetic home equity asset-backed securities is without question expected to provide more liquidity and a more diverse set of options for market participants interested in either buying or selling protection on home equity bonds. But one question does remain: how cash and synthetic spreads - volatile in the sector due to recently increased liquidity and often mismatched supply and demand fundamentals - will react.

Markit Group Limited on Thursday, along with 16 investment banks, launched the synthetic ABS index of U.S. home equity ABS, called the ABX.HE. The ABX.HE is comprised of five indices referencing baskets of single-name ABCDS on subprime RMBS reference obligations ranging from triple-A to triple-B minus.

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