Monetary Policy Report submitted to the Congress on July 18, 2007, pursuant to section 2B of the Federal Reserve Act
Figure of spreads over libor of securities backed by subprime residential mortgages, 2006-07
Data are plotted as three curves. The spread over libor of securities rated AAA stays in a range of about 15 basis points to 30 basis points from the beginning of 2006 through early July 2007. The spread over libor of securities rated A holds in a range of about 40 basis points to 70 basis points from the beginning of 2006 to the end of February 2007. It widens in early March, reaching a peak of 150 basis points in mid-April, and then generally falls back to about 50 basis points by mid-June. It widens again in late June, reaching 90 basis points by early July. The spread over libor of securities rated BBB minus stays in a range of about 200 basis points to 375 basis points from the beginning of 2006 to the end of February 2007. It widens sharply in early March, reaching a peak of 900 basis points by early April, and then generally narrows to about 400 basis points by the end of May. It widens again in the second half of June, reaching 750 basis points by early July.
Note: The data are weekly and extend through July 6, 2007.
Source: Merrill Lynch.