Subordinate home equity spreads widened this week, as some speculated that investors began to grow nervous of risk involved in the deals, and a number of analysts released sour outlooks on residential mortgage performance, particularly in the subprime market. Some deals in secondary trading are trading south of where they've been in recent months, on the anticipation that the price buyers are willing to pay is headed further in the same direction, according to industry sources.
The widening did not come as a surprise to distressed debt buyers that have been waiting for such an opportunity, such as United Capital Markets, whose traders pointed to wider spreads on home equities in secondary trading last month. The question is if the spreads will continue to widen. And if so, by how much?