Displaying an increasingly bearish sentiment on the home equity ABS sector, JPMorgan Securities analysts last week, calling the mix of expected slowing home price appreciation and simultaneously heightened short-term borrowing costs an "indeed ugly" mix, lowered its bias last week to neutral on the asset class.

Risk of default, particularly at the low end of the credit spectrum, has undoubtedly escalated in the market's perception. Spreads in cash triple-B minus home equity ABS have gapped out by 40 basis points on average this quarter, while synthetic market spreads have ballooned by 85 basis points, according to JPMorgan. Analysts anticipate spreads will keep pace with yields and rate hikes initiated by the Federal Open Market Committee.

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