For the past couple of years the European market has been guilty of sifting its largest issues through to the second half of the year. Pair this with a much leaner first half and you have market dynamics that disrupt the supply and demand scenario and send pricing jutting out. But as we move into the second half, the growing pipeline promises to keep the market as busy as the first six months. Investor demand, however, seems unaffected.

According to Merrill Lynch, structured credit spreads tightened from March and kept steady over the summer months. "With strong volumes forecast for September and into the fourth quarter, some further supply driven spread widening could be expected," reported analysts at Commerzbank. "However the hiatus in volumes over the last three months coupled with the significant investor allocation held back for the fourth quarter, will counterbalance any supply side driven influence and drive some spread tightening."

Approximately E102 billion (US$111.2 billion) of paper backed by European collateral has been issued so far this year and in the last four months of 2003 industry sources expect to see at least E16.9 billion (US$18.4 billion) per month.

Still at the forefront is a bulging RMBS calendar that in September has already pencilled in a variety of continental deals expected to price by the close of the month. At least US$65 billion has already been issued in RMBS paper this year, said Merrill Lynch, surpassing the total for 2002. This year's figure is expected to reach the US$100 billion mark.

Last week a number of repeat issuers began marketing yet another round of tranches to add on to their substantial issuance programs already seen this year. Among the names were a couple of deals under several U.K. master trust programs.

Standard Life Bank was in for round two after an early March introduction of its Lothian Mortgages Master Trust. Its E2.2 billion (US$2.3 billion) Lothian Mortgage No.2 this time is offering buyers a substantial Euro portion distributed among a E42.9 million (US$46.7 million) piece, E48.3 million (US$52.6 million) piece and a E53.7 million (US$58.5 million) piece. Two U.S. dollar tranches totalling $1.2 billion are also being offered along with a leaner GBP200 million (US$316 million) sterling piece. A larger GBP2.05 billion (US$3.23 billion) deal is also out under the Northern Rock's Granite Master Trust and will likewise offer investors tranches split into Euro, U.S. dollars and Sterling pieces.

On the subprime side, Kensington Group is marketing GBP650 million (US$1 billion) under the Residential Mortgages series through Barclays Capital and Bear Stearns. It is offering an

A-1' rated tranche along with GBP315.3 million (US$498 million) of triple-A notes. Under the triple-A piece is offered a GBP44.2 million (US$69.8 million) double-A piece, GBP15.6 million (US$24.6 million) single-A piece and GBP15 million (US$23.7 million) of triple-B notes.

The continent is bringing its fair share of activity that should help to plump up volumes. Among the names marketing last week is what will be the largest deal yet issued under the KfW sponsored Provide platform. Provide-A 2003-1 offers E3.1 billion (US$3.38 billion) of synthetic exposure to German mortgages originated by HVB. HVB and Lehman Brothers are managing the deal that will issue E386 million (US$421 million) of notes ranging from triple-A to triple-B, offered under a E2.64 billion (US$2.88 billion) super senior tranche. According to analysts at Merrill Lynch, German domination of synthetic RMBS structures could see continued competition from neighbouring countries in the second half of the year.

And Spain adds yet another RMBS deal to the pipeline with Caixa Catalunya's E850 million (US$927 million) Hipocat 6 transaction, slated for September pricing. CAI and Deutsche Bank are managing the deal, which offers investors E787.6 million (US$859.3 million) triple A piece, E15.7 million (US$17.12 million) double-A rated notes and E12.7 million (US$13.8 million) triple-B rated notes. Industry sources noted that a number of deals are still expected to price before year-end

According to Fitch Ratings, the Spanish market should continue to see rapid expansion. The agency said that RMBS transaction will still take the lead in the short term and as an encouraging sign on performance the rating agency late last month upgraded five Spanish RMBS tranches. And from the Iberian Peninsula is a Portuguese deal currently marketing an RMBS through ABN AMRO. Pelican Mortgages is offering E611 million (US$665 million) of triple-A notes along with a E16.3 million (US$17.7 million) double A tranche and a E22.8 million (US$24.8million) triple-B tranche. Industry sources are expecting a number of repeat issuance to follow from the country before the end of the year.

Away from RMBS, a E500 million (US$545 million) Spanish securitization of SME loans under FTPYME Bancaja 2 also began marketing last week. Three triple-A tranches are offered, all with a 2.4 year average life. The Class A3 triple-A rated notes are backed by a government guarantee and a smaller E32 million (US$34.9 million) single-A piece and EE9.5 million (US$10.3 million) triple-B piece are also being offered.

The Federation Internationale de Football Association (FIFA) is back in the capital markets with a $262.5 million catastrophe bond linked to the cancellation risk of the FIFA World Cup 2006 to be staged in Germany. The notes under Golden Globe Finance are expected to include a U.S. dollar denominated piece, Swiss Franc denominated notes and possibly a Euro denominated note. FIFA already tapped the market in anticipation of the 2002 World Cup, securitizing the global marketing rights associated with both the 2002 and 2006 Cup tournaments.

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