While spreads for The Permanent Financing No. 4 reached the tightest pricing levels among any U.K. MBS seen this year, how long the tightening bias will continue is a matter of speculation. Some market players are hoping that with this deal represents a plateau in spread valuations while other market reports indicate that there is still more room to tighten before the trend reverses.
Trading cooled last week when compared to the volume recorded in the prior week, with little added to the pipeline. Only 3.5 billion (US$4.29 billion) of new paper marketed throughout the week, according to market estimates. "Secondary trading reflected the market's state of mind in recent days - stalemate," said analysts at the Royal Bank of Scotland. "Thoughts are that spreads are too tight, but pent-up demand for assets keeps participants returning."