© 2026 Arizent. All rights reserved.

EM and U.S. swap roles in subprime horror flick

Published 3 Min Read

It used to be that the players of U.S. high finance would barricade themselves when an emerging market turned ugly. Especially if the monster were oversized – say, Argentina in 2002 – they’d frantically seal off every approach.

Like the archetypal Final Girl in a horror movie – the one who outlives her more reckless friends until the nail-biting end – they could only imagine where the maniac lurked: behind the door, down the hallway or right under the bed.

But now the maniac is subprime, an utterly U.S. creation, and it’s the emerging market protagonists who are cast as the Final Girl. And there’s another difference: She looks a lot more relaxed than scared.

RMBS last week from Mexico and Kazakhstan, plus a fluid deal pipeline in a number of emerging markets, show that America’s subprime horror flick simply doesn’t translate. It’s true that ebbing liquidity in emerging markets overall is pressuring spreads, forcing issuers to adjust from the go-go pricing of the last couple of years. But for EM ABS and MBS, the adjustment’s been slight, and, by some accounts, long overdue.

Kazakhstan’s first RMBS from BTA Ipoteka (see p. 19) faced some pricing pressure, but that drew what little strength it had from the emerging market retreat, not subprime anxiety.

An even better illustration of subprime’s parochial reach was an RMBS from Mexican originator Su Casita (see p. 18). The deal had a B tranche that went for an inflation-indexed 6.47%, pricing a couple of basis points over a comparable transaction from peer Credito y Casa dated last December, prior to the subprime blowup. What’s more, all the buyers in Su Casita’s B piece were foreign. One source said bankers at lead Credit Suisse pre-empted analogies with U.S. subprime by differentiating Su Casita’s borrowers from the moment they launched the deal.

Mexican originators have been arguing for weeks that subprime radioactivity won’t spread south as investors will recognize that their collateral is a different species. Still, perception matters and when markets ricochet around, even the vaguest resemblance to something toxic can send foreign investors home. On second thought, if you’re an American RMBS investor, home might be the scariest place of all.

(c) 2007 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

http://www.asreport.com http://www.sourcemedia.com

For reprint and licensing requests for this article, click here.

More From Asset Securitization Report

Deutsche Bank, Credit Suisse Settle U.S. Subprime Probes

Deutsche Bank AG and Credit Suisse Group AG agreed to pay a combined $12.5 billion to resolve U.S. investigations into sales of the toxic debt that fueled the financial crisis, putting behind them a major dispute that undermined confidence in the banks and raised questions about their turnarounds.

U.S. Subprime RMBS Improves at Slower Pace: Fitch

The rate of improvement for U.S. subprime RMBS has slowed down, according to Fitch Ratings. In a report released today, the agency said that we are not going to see the same stellar progress in the asset class as we have over the last three years. Weighing on further improvements are changes in collateral composition and a backdrop […]

U.S. Subprime CDS Recover from Maiden Lane

U.S. subprime credit default swap prices recovered in July after being adversely affected in June by the Maiden Lane auctions and the problem looks unlikely to recur, according to Fitch Solutions‘ index. “Increased uncertainty in the broader markets is likely to keep Maiden Lane on the backburner,” Alexander Reyngold, senior director, Fitch Solutions, told this […]

U.S. Subprime CDS Continue to Rise, Says Fitch

U.S. subprime CDS have increased to levels not seen since late 2008, according to Fitch Solutions’ latest subprime RMBS total market price index. The index continued its remarkable upward trend, increasing 7.6% this month to 9.37, according to Fitch. “Subprime asset quality has not only stabilized, but begun to improve significantly, a far cry from the […]