The Big Short may have damaged sub-prime bonds, says Morgan Stanley

Adam McKay’s Oscar-winning drama is cited as factor in wariness among investors towards similar bonds based on vehicle loans

The American financial services firm Morgan Stanley has blamed Oscar-winning film The Big Short for a reluctance among investors to sign up for sub-prime bonds, reports Bloomberg.

Adam McKay’s acclaimed drama is about the housing bonds sold to investors prior to the 2008 financial crisis that were largely based on sub-prime loans to risky borrowers. While new financial rules have improved the quality of such packages, Morgan Stanley notes in a new briefing that investors remain suspicious of similar-looking car-based bonds.

“Concerns about growing recessionary risks – and perhaps even the popularity of the recent movie The Big Short – have motivated investors to investigate any potential source of weakness,” reads the firm’s briefing.

“Consumer sectors that involve large initial outlays, such as housing and autos, provide a natural place to start,” it continues.

Morgan Stanley nevertheless says it does not believe car-based sub-prime bonds will go the way of their housing equivalent, whose failure helped trigger the financial crisis. “The current credit structure of these auto deals remains fairly resilient,” the briefing states.

In The Big Short, which won the best adapted screenplay Oscar and was nominated in a further four categories, a diverse set of investors make financial-market wagers that the sub-prime housing market will fail. McKay’s film stars Steve Carell, Christian Bale, Ryan Gosling and Brad Pitt.

Bloomberg reported in February that some hedge funds were hoping to similarly exploit weaknesses in car-based bonds.

Powered by article was written by Ben Child, for on Wednesday 6th April 2016 16.03 Europe/ © Guardian News and Media Limited 2010


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