Along with a record month for new issuance, the market saw an abundance of floating-rate classes in many deals, with some issuers using them for the first time.
Auto issuance led the pack again last week, with a $3.2 billion offering from Ford Motor Credit Co., a $1 billion transaction from WFS Financial, and a $655 million deal from CarMax Group.
This marked the first time WFS offered a floating-rate class, in the two- to three- year area. Earlier deals from General Motors Acceptance Corp. and Toyota Motor Credit Corp. also featured floating-rate classes for the first time.
"Traditionally, auto issuers like to do fixed-rate deals because it matches their assets and liabilities a little bit better," said an ABS trader. "Of the four big deals this year, Toyota, GMAC, Ford and Western, all four of those deals were structured with the two- and three-year classes to be floating-rate. There's some investors that are hungry for assets, especially assets that offer a little bit more incremental spread relative to credit cards."
In issuing so much floating-rate paper, ABS issuers have helped create tighter spreads and better technicals for fixed-rate paper. Since the beginning of the year, spreads have come in two to five basis points.
"It has created a better technical situation for fixed-rate two- and three-year auto paper," said the trader.
The market has seen over $10 billion in issuance so far this month, and market players are saying credit cards are poised for the next wave of issuance.
Household International priced a $900 million credit card transaction. Citibank issued $850 million in subordinate bonds last week, and some say the seniors cannot be that far behind.
"So I think you're going to have some credit card issuance from some of the big guys like Citibank and probably First USA again," said the trader. First USA was absent from the market for all of 2000.
Part of the reason for boom in issuance is that the cost of funds is cheaper than the corporate bond market.
Elsewhere in the market, Bombarier Capital Inc. is marketing $285 million in manufactured housing-backed notes.
Conseco Finance is currently marketing a $620 million home-equity deal, and Countrywide Credit Industries is also prepping a home-equity deal. New Jersey's Public Service Electric & Gas is expected to price its $2.5 billion stranded-cost securitization this week.
"We have to compliment the issuers who have come to market to date, especially the auto issuers where it really made up the vast majority of some of the deals we have seen this year, by structuring deals to meet the demand that is out there," said the trader. "Not that January has always been a good barometer of what the rest of the year holds, but I think it is indicative of what likely could be a very heavy year for new issuance."
