CDOs/CLOs

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Banc of America Securities LLC 2,368.0 1 21.5 3 Citigroup 1,830.0 2 16.6 3 Credit Suisse First Boston 1,645.9 3 14.9 2 Morgan Stanley 1,540.6 4 14.0 1 UBS 1,447.2 5 13.1 3 Lehman Brothers 1,012.4 6 9.2 1 Deutsche Bank AG 817.2 7 7.4 2 JP Morgan 317.2 8 2.9 1 Goldman Sachs & Co 40.0 9 0.4 1 Industry Total 11,018.5 - 100.0 9 Source: Thomson Financial

The ABS market experienced its first early amortization of the year last week, when Mellon Bank Premium Finance Loan Master Trust, Series 2002-1 breached its 5% transferor interest 10-day average trigger, according to records filed with the Securities and Exchange Commission. In the filing, issuer Mellon Financial Markets, reported that the event occurred on March 7, and that funds were in the process of being deposited with the trustee, Wells Fargo Bank, and monthly principal distributions would begin with the April 15 payment.

The seemingly endless supply of interest in real estate investments struck an opportunistic chord with the creative forces in the structured-finance market, resulting in a brand new CDO that taps REITs. Small and mid-sized REITs, which generally have trouble accessing the capital markets due to cost concerns, were able to raise funding through a new structure in the CDO market.

NEW YORK - Despite regulatory uncertainty, the ABCP market is currently showing a record $775 billion in outstandings, according to statistics from the Federal Reserve. Growth in the whole loan mortgage sector and increased interest on the part of CDO managers in conduit funding are expected to fuel the creation of new ABCP programs in 2005, market sources said.

NEW YORK - Investment banks providing repo - or repurchase - funding to clients via the ABCP market are looking for novel structures in order to take these transactions off balance sheet, sources said.

Partially enhanced ABCP outstandings grew 4.3% from the 3Q04 to $601 billion at the end of 2004, consistent with amounts recorded at year-end in 2002 and 2003, according to a new report from Standard & Poor's. This figure has remained constant for the past three years, after growing an average 36% annually during the preceding 10 years.

The U.S. primary ABS market priced upwards of $7 billion during the abbreviated week leading into the Easter weekend. Volume was slightly down relative to the three weeks prior, which all saw volume of over $10 billion. The real estate sector comprised over $4.1 billion in total volume last week.

The available funds cap was the topic of discussion by analysts at Citigroup Global Markets and Morgan Stanley last week, as it has come into focus recently as short-term rates have risen steadily and excess spread on new deals has diminished.

A pending Congressional bill to reform liability laws for automobile rental and leasing companies could boost commercial activity in those sectors and possibly raise ABS issuance volumes as well. The bill may repeal existing vicarious tort liability laws, in which the leasing company of a vehicle can be held liable for damages or injury caused by the operator of the vehicle, or lessee, lifting a substantial cost burden for leasing and rental companies. The bill passed through the U.S. House of Representatives earlier this month and is awaiting consideration by the Senate.

Moody's Investors Service highlighted its expanded method of calculating net losses in auto loan pools, in a report issued last week. The calculation Moody's uses is an expansion on the traditional method of calculating cumulative net losses, and involves calculating a new statistic called cumulative net loss to liquidation, which Moody's claims is an indicator of the standard net loss statistic.