The rapid deterioration in the employment market in Spain has been mirrored by the sharp increase in arrears for Spanish RMBS transactions with Moody’s Investors Services 60+ days in arrears in Q2 09 at 2.8% compared with 1.5% a year ago, according to analysts at Barclays Capital.

Unemployment is the biggest risk to RMBS investors. According to Barclays analysts, unemployment in Europe continued to rise, with a 0.1% increase in August to 9.6% and Spain has driven that increase, with the unemployed increasing to 18.9%, from 18.5% in July.

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