Barclays analysts expect to see about €13.5 billion ($18.3 billion) in publically-placed issuance of residential mortgage securities (RMBS) this year.

That would be a slight dip from the €14.1 billion posted last year.

In a report, the analysts said U.K. RMBS and Dutch RMBS will likely shoulder the weight of the sector, despite “government schemes” that might keep dampening volumes.

In the U.K, at least, the Funding for Lending Scheme has provided banks with cheap financing, reducing the incentive for them to securitize assets, including mortgages.

The Netherlands led the sector by a wide margin in 2013. See below for issuance volumes, broken down by country, as compiled by Barclays. 

Netherlands RMBS (Prime)

 8,164,250,000

UK RMBS (Prime)

 3,797,657,000

UK RMBS (NC)

    509,394,443

Ireland RMBS (Prime)

  500,000,000

UK RMBS (BTL)

  454,007,142

Australia RMBS (Prime)

  448,275,100

Sweden RMBS (NC)

  194,615,580

Grand Total

14,068,199,265

In general, regulations and central bank policies will keep conditioning the fate of RMBS in European markets.

With issuance this slow, the secondary market is looking brighter.

In particular, Barclays analysts expect yield-hungry investors to keep moving down the capital structure into subordinated tranches in addition to buying paper from the small RMBS markets in Europe.

The analysts said they expected tender offers for deals to rise modestly as banks seek to boost their capital in anticipation of stress tests conducted by the European Banking Authority. Banks in “Spain and Portugal are again likely to dominate, and we see potential for Italian and Irish RMBS offers,” they said.

Below is a summary of total amount of structured deals targeted by tender offers and ultimately repurchased. The bulk of these volumes correspond to RMBS. 

 

Maximum amount offered to repurchase (EUR)

Total bonds repurchased (ABS-only) (EUR)

2012

39,926,315,011

12,538,916,920

2013

10,059,904,175

 3,140,694,874

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