Feb. 28 (Bloomberg) -- The perceived risk of owning low- rated subprime mortgage bonds lessened for the first time in nine days, derivatives suggest, after Federal Reserve Chairman Ben S. Bernanke said the overall home loan market is healthy.

An index of credit-default swaps on 20 securities rated BBB- and created in the second half of 2006 rose 1.2 percent today to 63, according to Deutsche Bank AG. The ABX-HE-BBB- 07-1 index, which fell earlier in the day, had dropped by more than a third since trading started Jan. 18.

``There's not much indication at this point that subprime mortgage issues have spread into the broader mortgage market, which still seems to be healthy,'' Bernanke said in congressional testimony today. ``It's a concern, but at this point we don't see it as being a broad financial concern or a major factor in assessing the course of the economy.''

The index had fallen in early trading after Santa Monica, California-based Fremont General Corp., the sixth-largest provider of subprime loans, said yesterday it would postpone fourth-quarter results for unspecified reasons. That was less than a month after a reporting delay by Irvine, California-based New Century Financial Corp., the second-largest subprime lender.

At today's level, an investor pays more than $1.8 million a year to protect $10 million of subprime mortgage bonds against default, according to the firm, up from $389,000 last month.

There are few signs that the record levels of early delinquencies on home loans made to borrowers with poor or limited credit histories last year is being caused by a small amount of particularly bad loans, Grant Bailey, a director at New York-based ratings firm Fitch Ratings said in an interview.

``The issuers and originators are still making the case that that's a possibility but we haven't seen any indication that things are going to return to a more traditional delinquency pattern yet'' on the 2006 loans, Bailey said.

Newer Indexes

So-called ABX indexes for low-rated bonds, used by some to bet on the direction of the housing market, have slumped as some investors expect losses at lenders focused on the riskiest borrowers to continue. At least 20 subprime lenders in the U.S. have closed, scaled back or been sold in the past five month.

``ABX trading has moved away from its traditional ABS investor base, away from fundamentals, and is increasingly traded as a proxy for sentiments on consumer finance and housing,'' analysts in New York at UBS AG said yesterday.

Two indexes linked to older BBB- securities have fallen too far based on the levels of expected loan losses, UBS said. Faster increases in early delinquencies on loans underlying the latest index mean investors should sell protection through the older index contracts and buy protection through newer indexes, New York-based Bear Stearns Cos. said in a report yesterday.

New ABX indexes are created every six months by securities firms, including Deutsche Bank and Goldman Sachs Group Inc., and London-based Markit Group Ltd. They indicate prices for credit- default swaps linked to 20 bonds, not prices for swaps on each. Credit-default swaps on mortgage bonds offer payments to buyers of protection if the securities aren't repaid as expected.

Yield Premiums

Subprime mortgages typically have rates at least two or three percentage points above safer prime loans. They made up about a fifth of all new mortgages last year, according to the Washington-based Mortgage Bankers Association.

Yield premiums over benchmarks on subprime-mortgage bonds rated BBB-, the lowest investment-grade rating, rose 1.75 percentage points in the two weeks ended Feb. 23 to 4.75 percentage points, the highest in more than two years, according to RBS Greenwich Capital. They've risen more this week, Peter DiMartino, an asset-backed securities strategist at the Greenwich, Connecticut-based firm, said today.

The highest-rated securities haven't been hurt as much. Typical floating-rate triple AAA rated subprime mortgage securities carry yield premiums about 0.16 percentage points over benchmarks, or the same as the average over the past year, according to a Feb. 22 report by Citigroup Inc.

About 2 percent subprime mortgages made last year were more then 60 days late after five months, nearly twice the rate for ones made in 2005, and the worst rate in at least seven years, according to a Feb. 22 report from Barclays Capital.

``The loans being made today are better than the loans that were made a year ago,'' Fitch's Bailey said in the interview. ``I think the loans that are originated today aren't going to have the same problems, but it really looks like those loans made in 2006 are going to have a lot of trouble.''

To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net

Last Updated: February 28, 2007 13:33 EST