The only thing bankers can have felt grateful for this Thanksgiving was a rest. Confidence in subprime-related mortgage products continues to fall. Rating agencies are slashing collateralised-debt obligations (CDOS) faster than you can slaughter turkeys. Analysts at Goldman Sachs reckon that, despite the large writedowns already announced by financial institutions, another $108 billion-worth of losses on subprime CDOS have yet to surface (see chart). Adding to the gloom, a $2 trillion source of mortgage funding in Europe, known as the covered-bond market, was temporarily suspended on November 21st because of sliding prices.
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