October set off to a promising start for the European securitization market with the launch of U.K. Building Society, Nationwide's RMBS deal from its Silverstone Master Trusts.
However, the recent pick-up in volume won't be enough to keep the market on-track to meet beginning of the year volume forecasts.
According to analysts at Deutsche Bank, the full year issuance for European securitization volumes is expected to reach €70-75 billion, around 30-25% short of analysts' forecast at the outset of this year.
Analysts at the Royal Bank of Scotland (RBS) also expressed doubt that Europe would be able to reach the levels forecasted at the start of 2011. RBS originally anticipated that 2011 full year volumes would come in at €85 billion in Europe. That forecast now look out of reach as primary volumes in Q4 2011 are not likely to make up for the shortfall created by the summer shutdown of the market.
The bank said it now expects 2011 to just about match the €73 billion of primary volumes seen in 2010, with that projection resting largely on how market conditions evolve in the coming months.
Europe continues to be plagued by growing uncertainty over the fate of Greece and the potential impact a Greek default could have on the market. This uncertainty is what led to the primary structured finance market in Europe to shut down for most of the summer months – the duration of this shutdown was the longest seen since the 2008/2009 period, according to RBS.
Three deals printed in September totaling €4.6 billion, still a sharp drop versus the €15.6 billion seen in the same quarter a year ago.
And among the new deals printing, RBS reported a significant shift towards dollar and/or U.S. investor-targeted funding, highlighted by the recent Holmes print (in which 85% of liabilities was U.S.-dollar denominated) and the Gracechurch credit card securitization which came in 144A format. "We believe this shift reflects the better depth of U.S. demand for asset-backed product currently and also the compelling basis swap economics for issuers," said RBS analysts.
However, Standard & Poor's analysts remain optimistic. According to a recent report, the rating agency said that placed European structured finance issuance still remains on track to top €90bn this year. The rating agency expects placed issuance to top 2010's €80 billion in issuance.