BOE Update

Mercifully, I am not the only one who read that BOE report (see last post) and thought something was fishy. Today's FT Alphaville turns up some other folks who think the bank may be underestimating things:

Britain’s central bank is implying that the banks it regulates should perhaps mark their dud assets to model, rather than to market, on the basis that market prices are unreal.

In fact, in terms of when the ABX measure, the market is probably stone cold accurate.

It may, or may not, be right for banks to mark-to-model - but that is because they tend to be holders of the more senior tranches of triple A subprime, rather than the junior stuff currently included by Markit.