Kensington Mortgages announced in its latest investor report that its RMS 15 and 16 U.K. nonconforming RMBS deals had tapped the respective reserve accounts supporting the transactions. Although Fitch Ratings said that it would take no immediate rating action on the RMS reserve draws, the news has added some pressure on nonconforming spreads beyond the credits affected.
The recent credit concerns have caused some widening in nonconforming spreads. Junior tranches have suffered the biggest impact, with triple-B paper widening the most, said analysts at Royal Bank of Scotland. They added that further tiering will likely take hold over the remainder of the year. "The RMS bonds rarely trade, but offer indications yesterday suggested that the senior bonds would trade about 7 to 10 basis points behind solidly performing nonconforming transactions," analysts said. "This widening has dragged out spreads across the nonconforming sector."