Bonds

Fitch: U.S. TruPS CDOs Have Modest Exposure To Subprime Troubles 

With several U.S. subprime residential lenders announcing subpar 2006 earnings in recent weeks, the latest chapter in the subprime mortgage market slowdown may present a fairly minor problem for U.S. REIT-specific TruPS (Trust Preferred Securities) CDOs, since a majority of their collateral is made up of residential mortgage loans, according to a new report by analysts from Fitch Ratings and Derivative Fitch. Though research by Fitch shows that REIT TruPS CDOs make up approximately 13 percent of the entire TruPS CDO arena, Fitch Managing Director and REIT group head Steven Marks said that the inclusion of residential mortgage obligor TruPS has actually declined over the last two years. “Spreads have tightened and the yields on the TruPS are not cost-effective for issuers,” said Marks.