BNP Paribas, halted withdrawals from three investment funds because it couldn’t ‘fairly’ value their holdings after U.S. subprime mortgage losses roiled credit markets, Bloomber reports.
The funds had about 1.6 billion euros ($2.2 billion) of assets on Aug. 7, after declining 20 percent in less than two weeks, spokesman Jonathan Mullen said today. The bank will stop calculating a net asset value for the funds, which have about a third of their money in subprime securities rated AA or higher.
BNP’s announcement sent its shares down as much as 5.5 percent, pulled the benchmark European stock index lower by more than 2 percent, and helped U.S. Treasuries rally for the first time in four days. Investors are shunning bonds backed by home loans after late mortgage payments by borrowers with poor credit histories rose to the highest since 2002.
“The complete evaporation of liquidity in certain market segments of the U.S. securitisation market has made it impossible to value certain assets fairly regardless of their quality or credit rating,” BNP Paribas said in a statement.