The ongoing disruption in the commercial paper market will keep structured investment vehicles under pressure, Derivative Fitch said in a report issued today.

The agency doesn’t expect a short-term improvement in either the current commercial-paper funding environment or the current illiquidity and re-pricing of credit risk in the market.

Structured investment vehicles (SIVs) with little to no U.S. subprime residential mortgage-backed securities (RMBS) exposure, a relatively long liability structure, and in particular a good access to alternative sources of funding, will be the ones best able to withstand the adverse market conditions, it says.

“Some SIVs have already come under pressure, reflected in rating actions in the form of Rating Watch Negative and downgrades executed by Fitch,” says Stefan Bund, managing director for Derivative Fitch’s European Structured Credit team. “If the current lack of liquidity continues, and if asset price declines do not moderate, further rating actions may be warranted.”

Triggered by the credit crisis in the subprime RMBS market, liquidity in almost all areas of structured finance has diminished since July, Fitch said.

The evaporation of liquidity, combined with the repricing of all credit risk, has caused the market value of most structured finance assets to decline and has limited structured finance issuers’ ability to issue new debt, it said.

“The fact that SIVs to a large extent rely on short-term funding through the issuance of CP (commercial paper) makes them even more vulnerable to the current situation,” says Patrick Clerkin, senior director and head of Derivative Fitch’s SIV rating team.

“They currently have to refinance much of their debt through CP or asset liquidation in very hostile conditions.”