Shares of Thornburg Mortgage Inc. rose as much as 7% on Tuesday after Omotayo Okusanya, an analyst at UBS AG's securities unit, upgraded the shares and said the Santa Fe, N.M., jumbo lender likely will survive the turmoil in the credit markets.

Mr. Okusanya raised his rating on Thornburg shares to "buy," from "neutral," but he cut his price target by a third, to $18 a share.

Investors should not be overly concerned about credit risk in prime mortgages, "especially jumbo prime loans such as those originated by Thornburg," he wrote in a 13-page report. "Almost all AAA- and AA-rated bonds are distant from writedown risks, even under extremely conservative assumptions."

Thornburg's mortgages exhibit "even better credit characteristics than the typical prime jumbo mortgage," Mr. Okusanya wrote.

Bankruptcy "appears to be a low risk" for the lender and would require credit market fundamentals to deteriorate even further, he wrote.

Thornburg would benefit from Federal Reserve Board interest rate cuts, which would improve mark-to-market valuations of its loan portfolio, Mr. Okusanya wrote.

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