Everyone expected a lot of US sub-prime mortgages to go sour and everyone knew that leverage in the LBO market was getting ridiculously high. But the liquidity crisis that hit the ABCP market in August was something that almost no-one saw coming – and was greeted with panic and bafflement in equal measure. “We sat down early in the month and said ‘How far can this thing spread?’” reveals an ABS veteran. “We knew that the short-term money markets would be impacted, but it seemed that the entire ABCP investor base getting up and walking on 30-day paper was something that just could never happen.
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