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Absolutely. It only depends on having a quote for the bond, or bond basket. The more you have, the more it becomes difficult to hide it (one auction with a dozen baskets, 10 bidders, and one quote data point at a single date could still be dismissed as an "outlier"). But as the evidence will pile up, the ratings will become irrelevant to the write off.

Where the ratings matter, is that derating those securities would force a sale by those institutions with a "risk mandate" (e.g. pension funds are not allowed by statutes to detain bonds below a certain quality). Basically, they would have to liquidate their position by the end of the financial quarter, when their reporting is due. And this would provide lots of datapoints regarding the crash...

Pierre

by Pierre on Wed Jul 4th, 2007 at 11:05:30 AM EST
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