Concerns that Abbey National plc's unsecured debt ratings downgrade might impact pricing for its subsequent securitization became unfounded last week as its latest deal priced in line with HBOs' Permanent Financing 4. For market participants looking at the deal as a spread indicator, 14 basis points over Libor looks like the tightest levels for triple-A U.K. RMBS names at the moment.
"Spreads generally are thought too tight, but [the] need for assets keeps participants returning," reported analysts at Morgan Stanley. "However, selling premium bonds in secondary markets remains a difficult proposition. This lackluster demand for seasoned, but premium, assets solidifies our view that at least a pause in spread tightening is due." Abbey paper typically prices a bit wider than the Permanent series, at 14 basis points for the triple-A piece, industry sources said the guidance levels probably indicated a tightened market for the HBOS paper.