Notably, as the rising rate of delinquencies of subprime mortgages threatened to impose losses on holders of even highly rated securities, investors were led to question the reliability of the credit ratings for a range of financial products, including structured credit products and various special-purpose vehicles.
And the observed spread already reflects the likely impact that increased purchases of foreign bonds has had on their prices. In other words, while our measures can be expected to have contributed to a widening of spreads, foreign rebalancing is likely to have caused the spreads to narrow. The net effect is what we see reflected in prices today.