FRN in the second half

--last week, S&P downgraded 612 subprime backed RMBS. Moodys downgraded 399 subprime backed RMBS and 184 classes of CDOs backed by subprime ABS. --None of the implicated RMBS was short-dated senior clases --Floater issuance has been on the rise since the FOMC embarked on its policy tightening campaign in mid-2004. The inversion in the yield curve also led to attractive coupons in floating rate debt. During the nine years prior to this tightening regime (1995 - 2003), flaater issuance as a percentage of total investment grade corproate bond issuance had average just over 25% of total supply per year. Since 2004, floaters have comprised over 54% of new supply. It is no wonder that many of hte issues entering the market since 2004 are up for redemption in 2007. --Record issuance in March ($115 bil) and May ($111 bil) set the tone for a first half. --long maturity floater issuance in the first half lead much of hte surge as banks, insurance, and ifnance companies place debt beyond four years, representing 72% more floater supply in this part of hte curve ove the same period last year. --In the second half of 2007, gross issuance will be close to $800 billion, with roughly $480 billion(60%) in flating rate supply. --increase in long-end floater supply coupled with the expectation of higher Treasury yields should continue to put pressure on returns of long dated floaters as non-traitional floating rate investors absorb the technicals and look for value in fixed rate paper of similar maturity.