Subprime is indeed back in the headlines and with it, the ABX index.
Readers may recall the ABX index, which was created in January 2006, partially at the behest of people like Greg Lippmann. Consisting of baskets of CDS tied to subprime mortgages, it allowed investors to go long — or short — the market without actually having to hold onto bonds.
The press release issued at the time said it all:
NEW YORK, 17 January 2006 – CDS IndexCo LLC (“CDS IndexCo”), a consortium of 16 investment banks licensed as market makers in the Dow Jones CDX indexes, and Markit Group Limited (“Markit”), the leading industry source for independent mark-to-market pricing and valuations, announced today the launch of ABX.HE, a synthetic ABS index of U.S. home equity asset-backed securities.
. . . Bradford S. Levy, Managing Director, Firmwide eBusiness Group at Goldman Sachs and acting Chairman of CDS IndexCo stated: “The CDS of ABS market has grown at a rapid pace over the past six months, and we have seen increasing appetite among clients for a way to take a synthetic view on ABS. ABX is a direct response to that demand, and gives clients an efficient, standardized tool with which to quickly gain exposure to this asset class.”
Anyway, we bring it up (again) because a new Markit product begins trading on Wednesday.
It is called PrimeX, and it will be four indices of CDS tied to portfolios of senior, originally AAA-rated, tranches of non-agency RMBS securities. In other words, prime mortgages.
And here’s the press release:
London and New York, NY – Markit, a leading, global financial information services company, today announced the forthcoming launch of the Markit PrimeX index on April 28, 2010. The index tracks nonagency prime U.S. residential mortgage-backed securities.
The Markit PrimeX will serve as a standardized, diversified tool referencing securitized fixed-rate or hybrid adjustable rate mortgages that will allow investors to gain exposure to this asset class.
Time will tell if PrimeX proves as headline-grabbing as its ABX forbearer.
Related links:
New PrimeX index begins trading ahead of launch date – Structured Finance News
Not even your AAA ABX is safe anymore… – FT Alphaville
ABX marketing presentation – final draft – DocStoc
Who’s profiting from the subprime bust – Bloomberg