Tranche warfare

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The US subprime housing market has taken a nosedive. Sixty-day delinquency rates for subprime interest-only and option adjustable rate mortgages jumped from 3.47% in December 2005 to 13.06% in February 2007, according to San Francisco-based research and analytics firm LoanPerformance. The deterioration in loan quality has also been reflected in the ABX.06-2 BBB-, an index that comprises credit default swaps (CDSs) referencing 20 US subprime home equity loans originated in 2006 and rated BBB-

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