UBS Chief Sees More Stability for Subprime RMBS
UBS AG CEO Marcel Rohner told Swiss radio station DRS that the market for U.S. subprime RMBS is likely to stabilize before the end of this year, Bloomberg News reported on Monday. His remarks come as a trickle of subprime paper has begun trading again during the past few weeks, as HW covered recently -- but activity so far has been just that: a trickle. Rohner told DRS in an interview over the weekend that he sees the RMBS market stabilizing within the next three to six months, although consumer credit and commercial real estate will not be part of that stabilization. Many U.S. pundits have pegged weakness in commercial real estate as at the beginning of a slow cycle, with further softening in CRE expected throughout the duration of 2008 and into 2009. Rohner's remarks should not be confused with a call of a bottom in housing, however, as sources suggested to Housing Wire that subprime mortgage debt moving once again in the secondary markets -- still far more a hope than anything resembling reality -- won't directly impact troubled homeowners here in the States. "We're talking about distressed assets here," said one source, a hedge fund manager who asked not to be named. "The stuff that's out there will start to trade, but nobody has an appetite for new product right now. We're much more interested in buying up paper that we think has been devalued to the point of value." A look at the ABX indices, which track against subprime RMBS, would suggest that the market for subprime paper has yet to really unlock itself. The ABX-HE-BBB- 07-02 series, which includes equity tranches of various subprime deals, closed Friday at $9.46, just $.03 above its all-time low; the ABX-HE-AAA 07-02 series, which tracks investment grade debt, closed up slightly at $57.23 and has been trading within a tight range for the past week, according to market data provided by MarkIt Group Limited. Similar trajectories exist for other ABX rolls, suggesting that the market has not yet thawed itself out, as much as some market participants are beginning to toss around the idea of going long on subprime in the secondary market. That said, remarks by Rohner and other key industry executives suggest a more hopeful tone for the back half of this year.