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“There haven’t been many cases where downgrades haven’t been justified” |
In 2007, the global structured finance market suffered more tumult than ever before. For the first time, structured finance issuance actually fell below the previous year’s level. Unsurprisingly, this decrease was driven by the US RMBS and CDO markets, which fell 45% and 17% respectively. For the ratings agencies, the number of downgrades on structured finance securities reached new highs. The 12-month downgrade rate (measured as the proportion of rated securities that are downgraded at any point over the past year) for securities rated by Moody’s in the global structured finance market was a record 7.4%,
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