Comforting subprime data may be deceptive-Barclays

NEW YORK, March 26 (Reuters) - Late payments by U.S. subprime borrowers are increasing more slowly according to the latest data, but this moderation may be deceptive and largely due to seasonal factors, analysts at Barclays Capital said.

"March remits (loan performance reports) appear to show a comforting moderation in delinquencies," Barclays analysts said in a report on Tuesday. "Unfortunately, we believe surface appearances are deceiving."

"We attribute this month's slide in early stage delinquencies to a number of factors, of which seasonality is foremost," the analysts said.

Rising delinquencies and defaults on risky subprime mortgages have sparked troubles in the U.S. mortgage market and a crisis in broader global credit markets.

For months, investors and analysts have tracked so-called remittance reports, which are released on the 25th of every month and provide a snapshot of subprime loan performance over the last 30 days. The March reports detail the February collection period.

The reports show a decrease in the rate of 30-day and 60-day delinquencies, according to Barclays Capital.

After adjusting for seasonality, however, the data show a slight rise in the rate of delinquencies, the bank said.

The widely watched ABX index, which tracks subprime mortgages, fell on Wednesday, but this was due to broader concerns about potential losses at Wall Street banks rather than the loan reports, according to an analyst at a Wall Street bank.

The "AA"-rated portion of the 2007-1 ABX index, which references loans made in the second half of 2006, fell to about 20.75 from 23.42 on Tuesday.

"Another factor suppressing early stage delinquencies is the natural propagation of tardy loans through the pipelines," Barclays said in its report.

"Early stage delinquencies should decrease as loans progress toward more seriously delinquent (categories)."

Analysts at UBS also noted that "the effect of seasonality appears to be taking place when one takes a look at the 30-day delinquency charts."

"The decline in 30-day (delinquencies) this January and February are similar to the declines that occurred last January and February," UBS analysts said.

"You don't want to read too much into one month's data," the Wall Street analyst said.

(Reporting by Neil Shah, Editing by Chizu Nomiyama)