ABS

It goes without saying that structured products, particularly in the ABS space, are not the once attractive asset that had investors flocking to the sector.

Last week's highlight was the government's takeover of Fannie Mae and Freddie Mac. Since the announcement was made on Sept. 7, a Sunday, it led to a sharply higher open in MBS last Monday.

The beginning of September was wracked with uncertainty as Fannie Mae and Freddie Mac struggled with liquidity issues. That was until the government stepped in with a bailout plan for the GSEs. However, the government cannot stop growing fears of mounting losses at Lehman Brothers, which continued last week.

The importance of Fannie Mae and Freddie Mac not only to the U.S. mortgage market but to the worldwide economy was demonstrated last week when the U.S. Treasury Department put the two GSEs under conservatorship.

A small, although rising, number of prime jumbo mortgages are becoming seriously delinquent. According to a report released by Barclays Capital this morning, approximately 1.5% of fixed rate loans are 60 days or more past due.

With more home price information following the end 2Q08, Deutsche Bank Securities updated its outlook for U.S. home prices.

Jefferies & Co. has expanded its emerging markets fixed-income sales and trading unit. Jefferies has recently added four senior professionals in this area, including Leo Gazal, Mike Bellero and Ken Lockyer as senior salespeople based in New York, and John Gibbens as a senior trader in London.

Fixed-rate mortgage rates dropped sharply this week following the government's takeover of the GSEs.

Fitch Ratings will be introducing rating outlooks for U.S. structured finance deals.

Fitch Ratings said that credit events on Fannie Mae and Freddie Mac are unlikely to trigger large scale CDO downgrades even though both GSEs are referenced in approximately 30% of synthetic CDOs rated by the agency.

Moody's Investors Service downgraded the ratings of Residential Capital's (ResCap)senior secured bonds to 'Ca' from 'Caa2' and junior secured bonds to 'Ca' from 'Caa3'.

Delinquency rates ticked up slightly in 2Q08 for most commercial/multifamily mortgage investor groups, although they remained at the lower end of their historical ranges, according to a new Mortgage Bankers Association (MBA) report.

While there are positives associated with the placement of the GSEs into conservatorship, UBS noted that its impact on the overall housing market is expected to be modest. Analysts' outlook for non-agency MBS is on the modest side as well.

Markit will be launching an ABX.HE 05-2 index on Oct. 2. The ABX.HE is a tradable synthetic index of U.S. subprime ABS.

Standard & Poor's expects the U.S. Treasury's announcement that Fannie Mae and Freddie Mac had been placed in conservatorship by the Federal Housing Finance Agency, and S&P's resulting rating actions on these entities to have a minimal rating impact on U.S. and European synthetic CDO transactions, the rating agency said this afternoon.

Citadel Investment Group made four senior hires in the mortgage and securitized products business.

The International Swaps and Derivatives Association (ISDA), after consultation with industry participants, it will launch a protocol to facilitate settlement of credit derivative trades involving Fannie Mae and Freddie Mac, the U.S. government sponsored entities that went into conservatorship of the US government, effective Sunday, Sept. 7.

The Secretary of Treasury, along withthe Federal Housing Finance Agency (FHFA) announced that it has taken control of Fannie Mae and Freddie Mac.

Fitch Ratings has reorganized its Milan-based structured finance team. Alessandro Settepani had been appointed head of the rating agency's Southern European covered bond team.

Investment banking firm Morgan Joseph added two senior members to its newly added structured products group.