Subprime mortgage-backed bonds lead credit products rendered extinct by the collapse of the U.S. housing market, according to Moody's Investors Service.
Collateralized debt obligations packaging loans and structured investment vehicles will also disappear as investors refuse to buy debt linked to U.S. housing market losses, Jennifer Elliott, Moody's group managing director in the Asia- Pacific, said today at conference in Melbourne.
The worst U.S. housing slump since the Great Depression has triggered more than $504 billion of writedowns and losses at the world's biggest financial companies, many of which sold and invested in securities based on American mortgages. Subprime mortgage bonds made up almost half of the world's home loan debt securities prior to the housing collapse, Elliott said.
Structured investment vehicles, which operated by selling short-term debt to buy higher-yielding assets, have been forced to wind down or have defaulted after the seizure in credit markets cut their funding avenues. Investors are also avoiding CDOs, which package mortgage-backed bonds and use the income to pay investors.
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