Subprime CDS prices fell by -1.8% last month, following a seven-month rally that culminated in an overall price rise of 126%, according to a Fitch Solutions report.

Fitch Director David Austerweil partly attributed this modest decline to Maiden Lane II’s weak June auction performance, which was not only the largest auction thus far but also the least successful.  

Austerweil said that with just under 50% of the bid list selling, there is “abundance of future subprime supply that will continue to pose as a short-term negative for subprime CDS prices.”

Another detriment to prices is the remaining uncertainty on future Maiden Lane II supply resulting from a lack of a defined auction schedule from the New York Federal Reserve Bank, which Fitch analysts believe will serve as a ceiling for prices.

The current index level was listed at 12.18, down from 12.40 at the end of May. The report stated the largest price declines were seen in vintages, with the 2004 and 2005 vintages falling by -1.9% and -2.9% respectively. After significantly falling -8.4% last month, the 2006 vintage only suffered a slight -63 basis points drop. The 2007 vintage was the only vintage to increase, rising by 4.6%.

The price decrease was reflected in the 30-day and 60-day delinquencies rates, according to Fitch analysts, which rose 2.3% and 7.6% month-over-month rise respectively. The report attributed the growth in the 60-day rate to increased 30-day delinquencies and a rise in roll rates from 30-day to 60-day delinquencies.

There was an increase in both loans moving to the later stages of delinquency last month as well as loans moving from foreclosure to real estate owned, according to the report.   

“If a trend develops where a higher percentage of late-stage delinquency loans become real estate-owned, the foreclosure backlog may begin to clear,” Fitch Senior Director Alexander Reyngold said.

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