A Barclays Capital report examined the increasing possibility that FFELP student loan ABS will experience rating volatility in the upcoming months. As a result, the bank shifted its position to neutral from overweight on FFELP-backed SLABS.

Barclays analysts stated that there are two driving forces behind the potential ratings volatility. These are the end of the transition period on July 18 for Standard & Poor’s new counterparty risk criteria and the action by Moody’s Investors Service of placing the U.S. government’s sovereign debt rating on negative watch in light of the “debt ceiling impasse.” 

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