Agencies finished 2006 on a positive note with gross issuance up by 8% in December, according to Citigroup Global Markets analysts.

Even with the holiday-shortened week between Christmas and the New Year, agency gross issuance increased 8% to $78 billion in December from $73 billion in November, they said. The rise is a result of a 12% jump in 30-year fixed-rate issuance. In other markets, Citigroup said that 15-year fixed-rate issuance was flat, other fixed-rate issuance (20-year and IOs) rose less than a billion, while ARM issuance dropped by 15% to under $10 billion. ARM issuance in December made up merely 12% of total issuance, which is the lowest figure since April, Citi analysts reported.

For the year, Citigroup noted that gross issuance came in at $901 billion, which is the lowest yearly total since 2000. Individual sectors had mixed results, however. For instance, 30-year fixed-rate issuance came in about 2% less than 2005 at $628 billion, but 9% above its 2004 level. Meanwhile, analysts said that 15-year fixed rate issuance dipped 39% from 2005 and, at $50 billion, was less than one-tenth of the all-time record for 15-year issuance set back in 2003.On the ARM issuance side, the numbers fell for the third straight year, totaling $151 billion, or 16.8% of the entire issuance. The drop in ARM issuance was because of the overall dip in volume and a drop in the ARM issuance percentage.

Analysts projected the rise in December issuance, even though it was not quite as much they had initially estimated. In December, they noted that their forecast for a November increase, based on upswings in the Mortgage Bankers Association indexes, did not really happen, so they expected to see those applications make their way through the system in December. That seems to have been what occurred. Going forward, analysts are still expecting to see issuance lessen in the New Year as they think the seasonal factors are the controlling factor in the current purchase money scenario.

(c) 2007 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.