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Subprime Rally Building As Dealers Sop Up Supply:Credit Markets

This article talks about the tremendous rally that has occurred in subprime-mortgage bonds from 2005-2007, which have rallied 21.6% thus far this year. For some reason regulators seem to take a day trading mentality towards these securities because in 2009 when the bonds were trading for 33 cents, regulators were advocating the offloading of these "toxic assets", and now these bonds have rallied between 50-100% at different times. While the banks were totally overexposed going into the financial crisis the situation got exasperated by the mark to market accounting, and the panicked response to mark to market accounting. Fortunately the rules were changed yet the mentality to look at stressed pricing as a realistic measure of value, even for a market participant that doesn't need to sell immediately still seems to pervade and that is unfortunate.

http://www.bloomberg.com/news/2012-07-24/subprime-rally-building-as-dealers-sop-up-supply-credit-markets.html