UBS is offering super-duper bonds.
"Many investors are reluctant to buy MBS backed by Alt-A collateral including super senior paper, as they fear credit losses," UBS analysts wrote.
In a hypothetical super duper triple-A deal, the bonds have twice the credit enhancement of the super senior triple-A bond and four times the credit support of the straight triple-A bond. After running the structure through hypothetical scenarios, UBS determined that the super duper senior Alt-A hybrids offer great value relative to prime jumbo super senior hybrids and agency hybrids, and virtually eliminate the credit component.
Super duper senior Alt-A hybrids?
Mamma mia!
How about the Itsy-Bitsy-Teenie-Weenie-Yellow-Polka-Dot-Bikini-Shrinking-Mortgage-Collateral bonds? Is there any market for those?
And if you actually want to eliminate the credit component, as opposed to "virtually" eliminate the credit component, couldn't you just stick with US T-bonds?
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