For several weeks now, the asset securitization market has been able to sustain moderate production volumes in the face of the usual summer slowdown. Last week, however, the market showed significant signs of losing steam.
By press time, very few market professionals expected to see more than $10 billion in total issuance hit the market for the week. By Tuesday, slightly more than $7 billion was being marketed, and the home equity loan sector dominated activity, as usual, the credit card and auto sectors continued to make their presence known.
"It's dead. A lot of the focus now is on corporates," one trader said. "Everything will start kicking back after Labor Day."
The AMXCA 2006-3 credit card deal priced early on, via Barclays Capital. The three-tranche deal saw its triple-A, five-year piece come in at two basis points over the one-month Libor. While the entire deal had a five-year average life, some investors were able to pick up yield by taking a part of the triple-B piece, which priced at 28 basis points over.
NationStar completed a tiny $30 million net interest margin transaction. The one-tranche deal offered investors a coupon rate of 7.75%.
Citigroup Global Markets came to market with its eponymous Citigroup Mortgage Loan Trust deal, a $720 million transaction. On that transaction, the one-year, triple-A piece priced at five basis points over the one-month Libor, reflecting tighter spread levels for HEL paper with that duration. Bear Stearns Asset-Backed Securities, a $244 million home equity loan deal, priced its one-year, triple-A piece at 15 basis points over the one-month Libor, while its 4.41-year tranche offered even greater spread pickup at 300 basis points over the benchmark. Asset Backed Funding Certificates 2006-OPT1, a $1 billion transaction, came to the market via Banc of America Securities. The triple-A, one-year piece came in at just four basis points over the one-month Libor. Its 4.14-year, triple-B piece priced at 180 basis points over the same benchmark. Deutsche Bank Securities' ACE Securities Corp. 2006-SL4, also priced a $334 million home equity deal.
Market professionals did not expect the ABS market to pick up the issuance pace significantly for the rest of the week, although several deals were put into the market.
"I think through the end of August things are relatively tame," one trader said. "Most people - the European guys, and a lot of the big buyers - are away."
Among anticipated deals, guidance was released for a $900 million Sovereign Bank 2006-1 dealer floorplan transaction, as well as the $800 million GE-WMC Mortgage Securities 2006-1 transaction. Also, Nomura Securities announced a $575 million transaction from its dealer shelf, the Nomura Home Equity Loan Inc.
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