The new ABX index rollout last Monday might have been the highlight of an otherwise quiet week, but it did not do much to elevate the amount of paper issued. Although $13 billion in deals were in the market last week, just $2.4 billion priced by Thursday.
Unlike the final weeks of June, when many issuers rushed to get their deals out of the door, primary issuance has been persistently light so far in July. Last week, a handful of home equity and auto-loan ABS deals priced, leaving the secondary cash credit market to assert itself. There, said Bank of America analysts, seasoned bonds began trading at less competitive levels than several weeks ago. Traders appeared to be pricing toward worse scenarios, the bank said. Also, the ABX.HE06-2 index began trading on Wednesday, prompting indices in the synthetics market to tick up slightly, according to Bank of America.
"A lot of people were distracted this week by the index," said one trader.
Nonetheless, at least three asset securitization deals came to market before the week's end. Ownit Mortgage Loan Asset-Backed Securities came to market with a $295 million deal, via Merrill Lynch. Of the offered certificates, a two-year tranche priced at 11 basis points over the one-month Libor. Also, the 4.70-year piece came in a 49 basis points over. Investor demand held up through the entire capital structure.
"It is still CDO demand that is driving these deals," said one person familiar with the situation.
Another home equity loan deal, the $946.6 million Securitized Asset Backed Receivables Trust, 2006-FR3, came to market via Barclays Capital. All of the offered certificates priced on par, with the one-year piece coming in at five basis points over the one-month Libor. The 5.25-year tranche priced at 190 basis points over. Residential Funding Mortgage Securities also placed a $224 million transaction, via Bear Stearns. The triple-A rated transaction, on which Residential Funding Securities acted as co-manager, priced its two-year piece at swaps plus 25 basis points, and the 6.13-year piece at 72 basis points over swaps.
While Wall Street might expect the auto-loan ABS sector to suppress overall ABS activity for the year, it was a standout with a $1 billion transaction from issuer Household Automotive Trust. The deal came to market via HSBC Securities, and achieved Libor minus one basis point on the $296.5 million slice destined for the asset-backed commercial paper market. The best spread pickup opportunity was on the 3.38-year tranche, which priced at swaps plus 10 basis points.
A swath of home equity loan ABS transactions were in the market by press time, including a $2 billion deal from Bank of America, and an $800 million deal from Terwin Mortgage Trust.
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