Sub-prime to fill the yield hole


You know we’re running out of yield options when the investment banks are looking at products to cater to the sub-prime market. Clearly it is an area the banks don’t really want to touch. Never mind that, let’s try and railroad yield starved investors into 30 year products catering to riskier borrowers.

Of course these sub-prime products have been rated by the credit rating agencies (what a superb job they did with mortgage back securities etc).

I find it somewhat ironic that as the world economy is set to head into recession (or worse), such products are being introduced to lure sub-prime borrowers into buying properties. So the investment banks clip a nice fee on the sale of the product and the investor, if things get bad face the risk of defaults and the face value of their product getting smashed.

This has red flag written all over it.

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