U.S. subprime CDS have increased to levels not seen since late 2008, according to Fitch Solutions’ latest subprime RMBS total market price index.
The index continued its remarkable upward trend, increasing 7.6% this month to 9.37, according to Fitch.
“Subprime asset quality has not only stabilized, but begun to improve significantly, a far cry from the historic lows at the beginning of 2010,” said Fitch Managing Director Thomas Aubrey.
The 2004 and 2006 vintage levels went up 10% and 14%, respectively, and have seen respective increases of 27% and 57% since the beginning of 2010. The 2005 vintage showed a slight 2% rise.
Although the 2007 vintage leapt 12%, Fitch attributes its previously flat levels this year to a continued concern over the quality of assets within the vintage.
Fitch reported that recent loan level analysis of the indices’ constituents indicates improved 60- and 90-day delinquency levels across all vintages, as well as falling three- and six-month constant default rates.
The three-month constant repayment rate, however, showed only minimal improvements, which might imply a slowdown in price index increases, Fitch said.
"Higher quality borrowers may leave the pool, resulting in a lower credit quality pool on aggregate," Aubrey said.
