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Moody’s downgrades Lehman Brothers securities

Moody’s has downgraded several mortgage-backed securities owned by Lehman Brothers.

The rating agency downgraded notes issued by the Eurosail Prime 2007 trust, 5NP 2007 trust, 4BL 2007 trust and the EMF 2008 trust.

It said the potential additional costs Lehmans might incur when entering into replacement swaps or the risk associated with unhedged interest rate and foreign currency exposure arising if no replacement swaps are entered into forced Moody’s to downgrade.

It also said the operational risk associated with the servicing and cash management currently performed by Capstone Mortgage Services added to the concerns.

Moody’s had placed all the securities on review for possible downgrade when Lehman Brothers went into bankruptcy, but has now had to downgrade notes, which are currently fully exposed to interest rate risk, basis risk and
foreign exchange risk until a replacement swap counterparty is found


Question of trust over US guarantees

A round table debate discussed whether clients will trust the guarantees from US providers after recent market problems.
The Retirement Adviser director of retirement planning Nick Flynn said: “The theory behind these products is fantastic but is there is a question whether the guarantees will be met? I would rather spend money on a guarantee to have it but my question is whether a consumer will believe these guarantees will be paid?”

Yield marshal

The formidable equity income sector is soon to shrink as the IMA looks to tackle funds not conforming to its yield requirements – a measurement that has been difficult to do in the current climate. In recent weeks, the IMA has sent questionnaires to groups asking about the yield on their income funds and whether or not they believe them to be sustainable.


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