Adding to the investor concern over a bearish ABS CDO market, Derivative Fitch recently announced that it may cut the ratings on classes from three 2003 diversified structured finance CDOs and one high-grade CDO issued last year that have exposure to the infamous 2006 vintage subprime closed-end second liens.

With the 2006 vintage subprime closed-end second lien RMBS having unprecedented default and loss performance, as evidenced by the negative ratings actions by Fitch, Standard & Poor's and Moody's Investors Service, there continues to be an enormous amount of uncertainty with respect to the future performance of those bonds, said Kevin Kendra, managing director at Derivative Fitch.

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