The threat of fire sales of mortgage-backed securities is mounting as rating agency downgrades have pushed debt vehicles into technical default. The prospect of forced sales comes as a US Treasury-backed plan for a “superfund” to buy up distressed mortgage securities appears to have stalled. S&P and Moody’s have received default notices for $5bn worth of CDOs, giving investors in senior tranches the right to sell assets. The $75bn superfund plan – designed to purchase assets from distressed investments linked to banks and so prevent fire sales – seems to be stalled following the upheaval at Citigroup. “As far as we can see, it appears dead in the water right now,” said one senior Wall Street banker. Citi’s shares were down another 2 per cent, and Morgan Stanley shares fell almost 2 per cent as David Trone, analyst at Fox-Pitt Kelton, said it could face another $6bn of mortgage-related writedowns. Goldman Sachs again denied rumours that it was about to announce big writedowns.

This entry was posted by Helen Thomas on Wednesday, November 7th, 2007 at 5:34 and is filed under Capital markets. Tagged with citi, goldman sachs, moody's, morgan stanley, s&p. Edit this entry.