LOS ANGELES - For the first time in a long while, volatility has returned to the home equity ABS market. And with that volatility, some would argue, comes a more challenging terrain for ABS CDO managers.
For example, new issue spreads have softened across the board as ABS CDO investors have pushed back amid U.S. housing concerns, according to a report by Citigroup Global Markets analysts. They added that, as of Nov. 29, new-issue triple-B ABS CDO paper had recently traded at Libor plus 325 basis points. Adding fuel to the fire, hedge funds have been rushing to scoop up synthetic protection on subordinate home equity bonds, subsequently helping to widen cash spreads.