Prices on subprime credit default swaps may plateau: Fitch
Prices of U.S. subprime credit default swaps rose for the fourth straight month in February, signaling the possibility of a plateau in prices in the near future, Fitch Solutions said Friday. The index measuring subprime CDS prices experienced average monthly increases of 5% over the past three months, according to Fitch. However, within this same time frame, riskier vintages still weighed down the price index. Data on loans underlying the CDS prices also show improvements in delinquency and default rates with the 30-day delinquency index rate dropping 3.5%. Meanwhile, the 60-day delinquency index experienced a slight decline of 0.2% across all vintage types. David Austerweil, a director with Fitch, said "2006 and 2007 vintages saw respective price declines of 11.3% and 2.5%. While the latest results do not reflect recent improvements in delinquency rates and CDRs for these riskier vintages, continued rising severities may drag down total CDS prices." In terms of February loan performance data, Fitch reported an increase in loss severities. However, in a statement the agency said, "the increase was not unique to February as loss severities have increased at an average rate of 2% per month over the past year as the timelines for loans to reach liquidation continues to grow. February's 1.8% increase stayed close to that trend." Write to Kerri Panchuk.