If there is one thing the investing public has 'learned' in the last few years, it is 'no matter how bad the fundamentals, if it's been working, buy moar of it'. And so, it is with almost certain confidence that we should expect a resurgent flood of yield-chasing muppetry into no more egregious idiocy than the subprime-mortgage-debt market. As Bloomberg reports, the subprime-slime-backed securities that were created in the years before the financial crisis in 2008, which marked the last time they were issued, have gained almost 12% this year, or six times more than junk-rated corporate debt, according to Barclays. As one money 'manager' proclaims, "a lot of the uncertainty around the asset class has been taken away." Indeed, home prices will never go down ever again, right? (Just ignore this and this)

As Bloomberg reports,

Remember when nobody wanted to touch U.S. subprime-mortgage debt? That’s just a distant memory as it delivers some of the bond market’s best returns.

The securities that were created in the years before the financial crisis in 2008, which marked the last time they were issued, have gained almost 12 percent this year, or six times more than junk-rated corporate debt, according to Barclays Plc. After contributing to the collapse of Lehman Brothers Holdings Inc., bonds tied to the riskiest home loans have returned 75 percent since 2010, topping speculative-grade corporate debt for three straight years.

The reason...

“A lot of the uncertainty around the asset class has been taken away,” Tom Sontag, a money manager at Neuberger Berman Group LLC, which oversees about $250 billion, said by telephone from Chicago.

While almost 30 percent of the subprime mortgages tied to bonds are at least 60 days delinquent, the percentage has fallen from as much as 41 percent in 2010, data compiled by Bloomberg show. In the broader market for mortgage securities without government backing, which also includes loans known as Alt-A and jumbo debt, the default rate has fallen to 23 percent from 30 percent in 2010.

So - because historical default rate trends (in a ZIRP/QE/no-foreclosure environment) has fallen - but remains high - we should back up the truck because all is forgiven on subprime debt.

And sure enough, the 'pitchers' are out en masse... "get 'em while they're hot, they're lovely"

“It’s going away, there’s a dedicated buyer base and there’s strong fundamentals,”said Carl Bell, the Durham, North Carolina-based deputy chief investment officer at Amundi Smith Breeden, the U.S. unit of the money manager that oversees more than $1 trillion globally.

What could go wrong? Oh apart from FHFA's Mel Watt enabling 3% downpayments and subsidized homes for the poor and needy...

Four words - It's different this time.