Subprime Mortgage Index Tumbles an Eighth Day, Derivatives Show (Shannon D. Harrington)

   The index has fallen to a record low as some investors have used it to bet the housing slump will worsen and that losses at lenders focused on the riskiest borrowers will continue.

  Feb. 27 (Bloomberg) -- The perceived risk of owning low- rated subprime mortgage bonds jumped to a record for an eighth straight day, according to an index of credit-default swaps on 20 securities rated BBB- and created in the second half of 2006.

  The ABX-HE-BBB- 07-1 index fell 6.3 percent today to 63, according to New York-based derivatives broker GFI Group Inc. The index has fallen by more than a third since trading started Jan. 18, according to Markit Group Ltd. A decline in the index suggests investors expect credit quality to deteriorate.

  About 2 percent subprime mortgages made last year were more then 60 days late after five months, nearly twice the rate for ones made in 2005, and the worst rate in at least seven years, according to a Feb. 22 report from Barclays Capital.

  Credit-default swaps on mortgage bonds offer payments to buyers of protection if the securities aren't repaid as expected. Protection sellers are provided upfront and monthly payments.

   The index has fallen to a record low as some investors have used it to bet the housing slump will worsen and that losses at lenders focused on the riskiest borrowers will continue.

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