ABX Mortgage Index
A way to measure the effects of problems in the sub-prime mortgage
sector is to look at Credit Default Swaps (CDS). Remember that these
CDS contracts effectively work as a kind of insurance policy for banks
or other holders of bad mortgages. If the mortgage goes bad, then
the seller of the CDS must pay the bank for the lost mortgage payments
(alternatively ... if the mortgage stays good then the seller makes a lot
of money).
The index that measures the CDS market for home equity is called
the ABX.HE index. The sub-variation of this index that refers to risky
sub-prime loans is called the ABX.HE BBB index.
Markit's ABX catalog.
The ABX.HE BBB index. It has dropped by about 5-7% since July of 2006.
This is a _substantial_ drop! Notably, there was a major plummet of the
index starting in Dec 2006 when some of the dealers in risky mortgages
started going belly up.
Via "CreditMag, Roubini, and Housing Derivatives.