CDOs are hit

Turmoil in the subprime-mortgage market fanned out yesterday, hitting a group of investments exposed to the struggling class of home loans. --Moodys might slash rating of 91 CDO about $5 bil worth of securities, signalling subprime fallout is rippling through financial markets to an important class of investments. --Fitch release reports cautioning against commercial real-estate market --S&P just threated to downgrade subprime-mortgage backe securities held by CDOs --CDOs typically hold hundreds of bonds or loans, much in the way a mutual fund holds stocks. Many mortgage-backed securities tied to subprime home loans reside in these CDO investment pools. Unlike those of mutual funds, CDO managers, which include the big Wall Street investment banks and smaller boutique investment managers, dice and slice their holdings so investors can choose the amount of risk they take on with their CDO holdings. --The riskier slices of some CDOs are now coming under assault. Deutsche Bank data show that investors were demanding 7.75 percentage points above a popular interest rate benchmark in mid-June to hold triple-B-rated CDOs, up from about 3.70 percentage points at the beginning of 2007, evidence they want more return for their risk. --Credit Suisse estimated that potential losses to CDOs heavily steeped in the subprime market could range from $26 billion to $52 billion.