Barclays Capital analysts said that even in a severe stress scenario, U.K. nonconforming RMBS should not suffer losses nearly as severe as investors feared.

Under its series of articles called Barclays European Stress Testing (BEST), analysts tripled their coverage to 323 tranches across 41 U.K. nonconforming RMBS transactions, evolved their methodology, refined each of their four key assumptions, and took into account the sector's most recent performance data.

“The results show that even in our severe stress scenario, a stress we perceive to be greater than a rating agency triple-A stress — in which GDP contracts for a further year, unemployment hits 14% and house prices fall a further 20%  — almost 50% of triple-A rated bonds suffer no losses,” analysts said. “And under our base stress, no triple-A, double-A or even single- A bonds suffer any loss.”

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