Although more often a factor in funded high-yield CDO downgrades, a rock-bottom recovery rate recently hit a synthetic balance-sheet deal.

Last week York Funding 1998-1 was further downgraded by Moody's Investors Service, due in large part to recovery rates proving well below assumptions. Moody's would not specify the severity of the loss, although sources indicated that a certain defaulted credit came back at one cent on the dollar.

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