Although there's more expected in terms of conduit issuance, the last conduit expected for August -- BACM 06-4 -- priced last Friday.  For all of August, conduit issuance totaled $9.8 billion in four deals.  This compares to two deals in July amounting to $3.2 billion.  August pricing spreads on average are one basis point weaker versus July's averages, with BBB and BBB+ slightly more. 

 

The September conduit pipeline is a hefty $20+ billion, which is expected to limit further tightening over the near term. Merrill Lynch analyst Roger Lehman also suggests that the recent rally and tighter swap spreads may also reduce demand on the margin.

 

While spread tightening is seen as limited given the supply, any spread widening is also seen as limited.  Merrill's Lehman points out that there is likely some pent-up demand from the fairly light summer supply.  In addition, he believes the market is slightly cheap versus competing spread product. 

 

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