During its last full workweek of January, the ABS market started off by displaying a full spectrum of sentiments. On one extreme end, investors remained wary of spread levels to enter into ABX trades after the rollout of the third ABX.HE index, series 07-1.Trading on that rollout started on Jan. 19. Conversely, issuers were eager to exhibit their wares ahead of the popular ABS 2007 industry conference now underway in Las Vegas.
By Tuesday, ASR's deadline last week, some $10.2 billion in new ABS paper was in play.
Some market professionals noted that a negative view of credits, especially concerning the subprime portions of the index, kept many investors off to the sidelines. Barclays Capital noted that fixed-rates on the BBB' and BBB-' sub-indices were set inside of implied spread levels on series 06-2, probably because investors might balk at shelling out "upwards of 450-475 basis points running to enter into an ABX trade."
"No one wants to come out and draw a line in the sand," one market professional said.
Barclays also expected transactions underlying the ABX.HE 07-1 cohort to perform similarly to those referenced by series 06-2. The two share similar underwriting standards, collateral composition and could anticipate limited HPA.
Among them, Household Automotive Trust 2007-1 came to market via sole lead underwriter HSBC Securities with a $859 million subprime auto deal. The tranche with a 0.30-year average life priced four basis points under the Interpolated Libor, while the 3.29-year piece gave up just 19 basis points over Interpolated swaps.
Among HEL ABS, First Franklin Mortgage Loan Asset-Backed Certificates priced a $1.4 billion transaction via Merrill Lynch.
Whatever misgivings conscientious investors might harbor about the subprime HEL indices, issuers are looking forward to making deals with the 1,200 investors at the American Securitization Forum conference, and are not likely to walk away with just $10.2 billion in new paper.
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