Based on all the yelling coming from Wall Street and some of its economists, you'd think that spreads on sub-prime mortgages reached way up into the stratosphere.
Check out this graph. It says, on average, the spread over treasures moved out about 100 bps., from 198 at the beginning of the year to 302. That's hardly an six-sigma event. It's well within the bands of where corporate junk-bonds have historically traded. 
Of course, this doesn't address CDOs and Credit-Protect CDOs, but it's a start.
[btw, the middle line is "jumbos" which are bigger than the Fannie so-called "conforming" limits. There are some people crying about the little uptick in jumbos, as evidence of a dramatic 'credit crunch' that is going to wind the economy into recession. Here's the line, the limit, so to speak - you make the call whether it does the right thing by helping the right segment of the market:
"Limits for single-family mortgages purchased by Fannie Mae will remain at the 2006 level of $417,000 for one-unit properties for most of the U.S. Limits for multi-unit loans for 2007 will be as follows: two-family loans $533,850, three-family loans $645,300, and four-family loans $801,950. The 2007 loan limit for second mortgages will be $208,500."]
Sunday, August 19, 2007
"Honey, I Shrunk the Balance Sheet"
