Last week, European market players focused on developments in the U.S. subprime market. They were concerned about the possible contagion risks resulting from the recent problems in this sector - whether the U.S. subprime woes will negatively impact European market performance.

"The one dark cloud [that] remains [for the European market] is the U.S. home equity ABS market, where negative lender headlines in the past week looks to have accelerated the sell off, with for example the ABX.HE.07-1 triple-B minus index trading down to around 85 mid, from near par levels just four weeks ago," explained Ganesh Rajendra, managing director and head of securitization research in Europe and Asia at Deutsche Bank. "There is no observable spread contagion as yet to other ABS sectors, including of course the European mortgage / ABS market."

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