The ABS new issue market was slow to almost nonexistent last week, coming off the Memorial Day holiday.
Industry participants said the market was "taking a breather from several weeks of relatively heavy issuance," and it was not the same kind of decline seen earlier this year, caused by heightened risk aversion.
Traders were unsure if the issuance pause was temporary or the signal of a summer slowdown. "This market is very week to week; it has been hard to predict ABS issuer activity before a deal actually comes to market," an ABS trader said.
There was almost no new issuance, except for the mention of one deal from Korea by way of Citigroup, according to the same trader, though Citigroup did not return calls for confirmation by press time. The transaction, Korea Housing Finance Co. 2008-6 totaled KRW386.4 billion ($374.8 million).
Banc of America Securities and Merrill Lynch are currently marketing Merrill Lynch Mortgage Trust 2008-C1, a CMBS totaling $948 million. The deal is composed of 92 fixed-rate loans on 401 properties with an average loan size of just over $10 million, according to a presale report from Standard & Poor's. The rating agency said that 59.5% of the pool is made up of retail and office properties.
In the AAA' stack of the capital structure, the two-year A1 tranche priced at 130 basis points over swaps while the four-year A2 slice priced 155 basis points over swaps. The AJ tranche priced 325 basis points over swaps, with close to a 10-year life.
Co-managers on the transaction are Citigroup Global Markets and PNC Capital Markets. The deal is slated to close June 12.
In general, the market continues to see spread tightening on credit cards, SLABS and auto deals on both the new issuance front and in secondary trading.
Deutsche Bank analysts also noted that as a result of positive prepayment and legislative news, subprime RMBS front pay, second pay and third pay AAA' cash deals have witnessed strong demand.
Chatter in the market also continued to focus on housing legislation, as industry participants suspect that Congress is close to passing the Federal Housing Administration (FHA) refinancing plan now that both parties have agreed on the terms.
Most significant is the new decision to finance the plan through the GSEs by a 4.2 basis point premium on new business purchases of Fannie Mae and Freddie Mac, according to Lehman Brothers analysts. The plan will also now cap the maximum loan amount at the lower end of the FHA conforming limit, or $550,000.
Those benefiting will be at the top of the capital structure, Lehman Brothers said. This will be at the expense of the subordinate IO tranches because of the front-ending of losses with lower severities.
While issuance may not have been heavy, banks still had their hands full with shuffling their staffs around. Credit Suisse continued the recent trend of bank reorganizations by switching around its structured products group, tapping Mike Marriott as head of the division (see page 9).
The CDO group was also recently restructured to "manage and reduce its existing exposures and take advantage of trading opportunities," according to an internal memo from the bank.
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