The subprime mortgage market continues to hurt the dollar. Concern in growing that governmental actions to stabilize the marketplace as Standard and Poor’s mentioned that they may cut 12 billion of subprime debt. Adding to the concern is that over leveraged hedge funds may face a liquidity crisis in the near future.
Treasurys rallied Tuesday as worries about subprime mortgage debt and the deteriorating housing market hurt stocks and drove investors into safer U.S. government bonds.
Standard & Poor’s said it might cut $12 billion of subprime-related debt on expectations for more delinquent and defaulted U.S. home loans. This sparked a selloff in nongovernment bonds, stocks and the U.S. dollar and triggered the move into Treasuries.
“Clearly, the Treasury market is worried about possible spillover from subprime debt and elsewhere and this has caused risk premia to increase moderately in a number of asset classes,” LaVorgna said. “It’s happening in a relatively orderly fashion but the risk is that things could be less orderly and that the Fed might have to address that.” via CNN.com
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Sub-prime lenders should be overseen and controlled. It's sad to see all these people getting their homes reposessed. Handing out sub-prime loans to people without verifying income, etc. has hurt the economy and helped nobody but the lenders.
This is the biggest bad move by government Standard and Poor’s mentioned that they may cut 12 billion of subprime debt.