Moody's Investors Service will begin issuing more detailed performance reports for European static synthetic CDOs. The rating agency announced late last week that it would begin providing "an absolute measurement of the credit strength of each individual tranche over time." The new product is called Moody's Metric (MM), which is a performance indicator derived from the rating agency's long-term rating scale.

Because the expected loss of a given tranche varies depending on its age, the MM was created to apply an ordinal, continuous rating scale - where a single number corresponds to the expected loss boundary for a given rating category - despite the age of the tranche. A Aaa' rating corresponds with a 1; a Aa1' with a 2; a Aa2' with a 3, etc. The system obviously cannot be used in the managed synthetic CDO universe because trades can impact both the average life and expected loss of a given tranche.

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