Sooner or later credit tiering will return to a structured credit market that for too long has failed to reflect differentiation in the underlying assets, deals’ performance or servicer record. That’s the theory anyway. Recent events, though, suggest that spreads and market sentiment remain remarkably resilient to all but the worst news. When non-conforming residential mortgage-backed securities market leader Kensington Group unveiled disappointing performance data and the use of the reserve account on RMS 15 & 16 it had an immediate impact.
“Initially, we saw a 10 basis point widening in Kensington AAA spreads as a result of the RMS 15 & 16 news but they have quickly recovered so that now we’re almost back to where we started,” says Rob Ford, head of ABS trading at Barclays Capital.
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