If the Federal Reserve Open Market Committee is truly in the "eighth inning of a tightening cycle," with a ninth inning approaching in June,  mortgage loan default risk is substantially diminished, according to a  Merrill Lynch report. This also bodes well for structured finance CDO performance. 

"In our worst case scenario, even moderately higher rates and near-flat home price growth, on their own, are unlikely to cause losses in the typical mezzanine HEL ABS tranche," the report states.

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