Moody's Investors Service said Wednesday that it might cut ratings on $5 billion of collateralized debt obligations, a day after lowering the ratings on sub-prime mortgage bonds that make up the securities.
The move, although viewed by many analysts as overdue, could deepen concerns about investor losses on securities backed by sub-prime loans made to people with dicey credit.
CDOs are packages of bonds put together by Wall Street firms. The packages are then sliced up, allowing investors to decide on a particular interest return and an assumed risk level. Such investment vehicles have become popular in the last few years with pension funds and other big investors.
A Moody's downgrade would affect 184 pieces of 91 CDOs, representing about 3.6% of rated CDOs containing asset-backed securities, the ratings firm said.