As the tail of the newly developed ABS CDS market wags the dog of the home-equity ABS market, analysts are hoping a more mature CDS market could bring the end of recently volatile home-equity ABS spreads. According to sell-side researchers, widening of home equity ABS CDS spreads is largely thought to be the primary cause for the recent widening seen, particularly for triple-B rated tranches.

The growth in two-way liquidity within the CDS of ABS market has allowed market players a method of efficiently shorting the ABS market, effectively creating a flip-flop of demand, according to Deutsche Bank Securities. "The supply of synthetic exposure in conjunction with the new-issue cash supply has overwhelmed the once dominant CDO bid with the market violently reversing the tightening trend," Deutsche Bank analysts reported last week.

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