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 Bear Stearns hedge fund woes stir worry in CDO market ZT |
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ceo/cfo
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作者：ceo/cfo 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
NEW YORK (MarketWatch) -- The uncertain fate of two Bear Stearns hedge funds which loaded up on mortgage-backed securities that are now souring has cast a sharp light on the fragility of the collateralized debt obligation market, a strategist warned.
Collateralized debt obligations, known as CDOs, are structured finance products that bunch together a portfolio of bonds and other fixed-income asset into a new blended security.
These securities are divided between senior and subordinated debt. In theory, any losses taken by the security are applied first to later classes of debt before earlier ones.
However, there are mounting concerns that the deterioration of many subprime mortgage-backed securities is yet to be properly reflected in the CDOs that hold them, according to Peter Schiff, president of Euro Pacific Capital.
This is because the value of CDOs is measured by a "marked to market" technique that pegs them to their value in the market, rather than their book value. Complicating the situation is the fact that CDOs containing mortgage-backed securities seldom trade, which can mean that their "marked to market" value does not reflect recent events.
"As long as these CDO bonds stay off the market, as they universally have, asset managers have the luxury of 'marking them to market.'" Schiff wrote in a research note.
"Not surprisingly, using this method the vast majority of these bonds are valued at par or greater," according to Schiff.
He argued that if the bonds in the Bear Stearns Companies Inc. (BSC) funds were auctioned on the open market, much weaker values would be plainly revealed.
"This would force other hedge funds to similarly mark down the value of their holdings. Is it any wonder that Wall street is pulling out the stops to avoid such a catastrophe?," Schiff said.
He further cautioned that the impact of hedge fund losses would be pale in contrast to the likely impact of an open market auction of subprime CDOs.
"Their true weakness will finally reveal the abyss into which the housing market is about to plummet," he said.
作者：ceo/cfo 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 Bear Stearns hedge fund woes stir worry in CDO market ZT -- ceo/cfo - (2180 Byte) 2007-6-22 周五, 05:09 (1087 reads)
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