The European primary market continued to build last week, promising a busy fall. While the tightening bias has continued into September, with a heavy CMBS pipeline doing nothing to impact spreads on deals that priced last week, market players are not as sure spreads will continue to hold. Instead, they expect more tiering to emerge on the back of the heavy pipeline ahead.

According to Citibank analysts, triple-A RMBS and two -year subprime/nonconforming spreads have tightened by around 0.5 basis points in the past few weeks while CMBS have tightened across all rating levels by between 0.5 and one basis point. "Most asset classes across all rating levels are now at, or close to, their 12-month lows, with the exception of credit cards," analysts reported. "However, we expect the tightening bias to come to a halt and some tiering to emerge as the (large) pipeline unfolds, likely to create new opportunities."

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