Although “sloppier” Alt-A fixed-rate bonds are attractively priced versus their prime counterparts, Amherst Securities Group (ASG) analysts said in a recent report that the collateral is converging.

ASG analysts explained that Alt-A product is cheaper when compared to prime collateral even without considering the additional potential upside of transition burn-out. They noted that the specific loans that are most likely to burn-out are those with higher cumulative loan-to-value ratios (CLTVs).

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