The asset securitization market did not exactly come roaring back last week from its spring break. While market professionals hoped that the market would produce about $14 billion in new issuance by week's end, it actually came in at about $5.2 billion by press time.
Bear Stearns brought a $713 million home equity loan deal to market, through a deal called BS ABS Trust 2006-HE4. The three-year tranche priced at 17 basis points over the one-month Libor in that deal. On the same day, ironically, Fitch Ratings downgraded four classes of Bear Stearns home equity ABS paper from early 1999, saying that over collateralization on the affected groups had been substantially reduced. It might be another three to six months before the over collateralization is depleted, at which point the losses would begin to work their way though the subordinate bonds. Confirming Fitch's concerns, remittance reports from March 25 showed substantially larger losses than average, said a source familiar with the situation.
Goldman Sachs brought a $459 million second lien MBS to the market through the GSAMP Trust 2006-S3. The two-year tranche on that deal came in at 20 basis points over the one-month Libor, while the tranches pegged against swaps ranged from 175 basis points to 290 basis points over. Argent Securities Asset Trust 2006-W4 came to market with a $1.4 billion home equity loan deal. JPMorgan Securities represented AmeriQuest Mortgage on that transaction, which saw the one-year tranche come in at six basis points over the one-month Libor. The most subordinate class was priced at 575 basis points over the same benchmark.
Banc of America Securities brought a $500 million Capital One credit card deal to market, through the company's COMET trust. Pricing on the single-tranche deal came in at one basis point less that swaps.
The Nissan Auto Receivables Owner Trust floated a $1.2 billion securitization through Morgan Stanley. Priced against Libor, Eurodollar futures contracts and swaps, the two-year tranche came in at four basis points below swaps. HSI Asset Securitization Corp. Trust priced a $1.4 billion home equity loan deal, tapping HSBC as lead manager. The two-year tranche came in at 11 basis points over the one-month Libor, while the most subordinate tranche was priced according to guidance, at 550 basis points over the same benchmark.
Market professionals kept a watchful eye out for the Ballantyne Re future flows deal from Scottish Re. Although guidance on the 144a deal was announced in early April, the deal has not priced yet. One trader said he thought investors might still be getting acquainted with the deal's structure and relatively rare cash flow. Scottish Re will borrow against future premium payments to repay the $2.1 billion it will raise from the capital markets. Ballantyne Re will use the funds to finance Scottish Re's excess reserve requirements under Regulation XXX.
Other pending deals at press time include about $4.7 billion in home equity ABS issuance; $1 billion in student loans; and a $118 million deal backed by fund fees.
"It was certainly a pick up from last week," said one market trader. "Weekly volumes for the year have been in the low $20 billion range. Volumes this week will be reasonable, but it won't knock anyone's socks off."
Some market traders see generally lighter issuance for 2006, owing to a slower mortgage market, among other reasons.
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