It was not exactly a stunning comeback for the securitization industry, but last week's collection of deals marked something of a stepped up pace of issuance and there was talk of revived investor confidence in the industry.
Since April 10, at least $4.3 billion in consumer ABS transactions came to market.
There were scattered, one-off inquiries into RMBS issuances, most likely prompted by Freddie Mac's announcement that it would buy new conforming jumbo mortgage loans from Wells Fargo, JPMorgan Chase, Citibank and Washington Mutual. With the help of that initiative, Freddie said it expects to finance between $10 billion and $15 billion in new jumbo mortgages for 2008 (see whispers).
The good news was tempered somewhat as Merrill Lynch announced disappointing first-quarter results and said it would cut about 3,000 jobs. The cuts are expected to roll out in about two weeks.
For the most part, however, investors stuck with consumer ABS assets.
"If you're not in cards, student loans or autos, you're going to have a hard time getting things done," one trader said.
Among credit cards, the American Express Credit Card Master Trust priced two series totaling $2.3 billion. The 2008-3 series saw its triple-A, senior notes come in at one-month Libor plus 95 basis points, while the single-A rated piece on that series came in at 350 basis points over. The smaller sized, Series 2008-4 series priced its senior notes at 140 basis points over the same benchmark, while the single-A piece came in at 425 basis points over.
The Citibank Credit Card Issuance Trust 2008-A5 priced a $500 million deal with five-year, triple-A deal that came in at swaps plus 137.5 basis points.
The $999 million SLM Student Loan Trust Series 2008-4 came to market via RBS Greenwich Capital, JPMorgan Securities and Credit Suisse. The one-year, triple-A-rated class conformed to double-digit spreads, at three-month Libor plus 68 basis points. The five-year notes, however, also rated triple-A, came in at 125 basis points over.
The commercial ABS class also made a showing, with the CNH Equipment Trust, Series 2008-A, and that deal used a combination of swaps and Libor benchmarks to get done. Banc of America Securities and BNP Paribas both acted as lead managers on the deal.
The short-term piece priced relatively tightly, at six basis points over swaps. The one-year, triple-A-rated tranche priced at one-month Libor plus 120 basis points. A couple of nearly four-year tranches, also rated triple-A, priced at swaps and Libor plus 195 basis points.
Other than that, investors watched carefully from the sidelines for signs that either the market had hit bottom, or the Federal government would intervene and effectively provide backing for future RMBS and student-loan ABS deals.
"They need to get back investor confidence," one buy-side source said. Widening spreads, however, give investors little incentive to jump in on prices that might be even lower in a few weeks, the source said.
In January, for instance, the Ford Credit Auto Owner Trust, 2008-A, priced its triple-A one-year notes at one-month Libor plus 60 basis points. Recently, price talk on a similar auto deal was at about 120 basis points over for the same duration.
"You don't know what it would be five months from now," the investor said. "Why would you buy on the way down?"
Another $1.8 billion in CMBS deal also priced, when the Citigroup Commercial Mortgage Trust, 2008-C7 came to market via Citigroup Global Markets and Goldman Sachs.
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