Fitch says confident in "AAA" subprime ratings

NEW YORK, July 18 (Reuters) - Subprime mortgage bonds carrying the highest, "AAA," rating have not eroded in quality despite price declines in the securities in recent days, Fitch Ratings said on Wednesday.

"We continue to be confident that "AAA" ratings reflect the high credit quality of those bonds," Glenn Costello, co-head of Fitch's residential mortgage group, said on a conference call. The top-rated bonds are designed to withstand a very high percentage of defaults, he said.

Fitch, Standard & Poor's and Moody's Investors Service last week roiled debt markets by announcing downgrades or potential cuts to bonds and collateralized debt obligations backed by subprime loans. Using new rating criteria that boosts default expectations, Fitch said it may take rating actions on at least $7.1 billion in low-investment grade debt, and about $803 million in CDOs.

A benchmark index of "AAA" rated subprime bonds dropped last week as investors speculated losses would not be isolated to the riskier, "BBB" rated bonds.