Finally the rating agencies are starting to wake up and smell the rotting carcasses

S&P May Cut $12 Billion of Subprime Mortgage Bonds

The market reacted with a knee jerk, and the abx-indices still don’t look that pretty:

ABX Historical Prices for the On-the-run Index

But the S&P announcement only relates to 2% of the outstanding and is of a better vintage than the worst of it (mostly 2005-06 junk). So this puts the lag at 18 mos…which could mean a long slow bleed. We shall see.