A banner year for asset-backed supply, combined with a deluge of negative headlines has researchers mixed on the supply outlook for 2003. All agree, however, that current spread levels will contract in most sectors during the first half of the year. As was the case heading into 2002, the wild card is the home equity and mortgage-related sectors of the ABS market, which accounted for a greater-than-expected $150 billion in 2002.

The market proved that it is no longer bulletproof, as the failure of NextBank N.A. early in the year and the blowup at National Century Financial Corp. nine months later illustrated the new world of risk investors must now factor into the valuation process. Conseco Inc.'s bankruptcy re-affirmed the growing awareness that a servicing transfer is not always a simple process.

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