It's been another tough week for the European market, as trades remained weak on the bid side, and new issuance continued flooding into the primary market. Still, Northern Rock's Granite 2005-2 transaction elicited a surprisingly strong response to guidance levels issued at the start of the week, considering the tight pricing recently posted by prime RMBS deals.
"I think that when you actually take a look you'll find that the pipeline for prime RMBS is pretty thin and things are starting to pick up from pricing levels achieved on triple-A paper in last week's market," said one trader. "I think a few months ago no one would have thought that prime Dutch RMBS would be trading at 15 basis points over Euribor."
Northern Rock re-tranched its transaction towards the week's close. Strong demand for the seven-year sterling-denominated notes resulted in an upsizing at the expense of the 4.3-year euro denominated class A notes - the dollar denominated notes also met with solid interest. The three triple-A dollar notes pieces dated at one year, 2.5 years and 4.3 years are talked at the four basis point area over Libor, eight basis point area and 13 basis point area, respectively. The three sterling triple-A pieces offered at one-year and two at seven years are talked at five basis point area and 16 basis point area respectively. The euro pieces are offered at one-year and 4.3-years are talked at 5 basis point area over Euribor and 14 basis points area.
Dealers released expected pricing levels for the 1 billion ($1.26 billion) TDA Cajamar 2 FTA. The capital structure offers investors three tranches of triple-A paper - the short dated 0.9-year piece is talked at four basis points over Euribor, the 5.1-year notes are expected to price at 15 basis points and the longer dated 13.3 year notes are expected to price at 18 basis points. Guidance was also issued for Spanish RMBS transaction UCI 12 - the triple-A rated piece is offered at 15 to 16 basis points over Euribor and the two triple-B rated tranches are respectively offered at the 20 and 50 basis point areas over.
Guidance for Talisman 1 Finance from ABN AMRO's CMBS conduit programme, backed by a portfolio of German properties, saw its Class A notes talked at Euribor plus low 20 basis points. An additional 6 tranches, rated from double-A to double-B, are on offer. The senior notes had a 54.9% LTV and a 1.89 times ICR. The properties included a mixture of office, retail and residential property. And price talk was revised on the Canary Wharf Finance II's tap - The 6.3-year, double-A rated class B tranche was revised to 33 to 35 basis points from initial talk in the low 30 basis point area over Libor, the 6.8-year single-A rated Class C1 tranche to 58 to 60 basis points over, from the low 50 basis point area, and the 7.2-year triple-B rated Class D1 tranche to 87 to 90 basis points over, from talk in the low 80 basis point area over.
"The European investor's wait-and-see approach is beginning to give and it's led to the repricing of certain sectors, like CMBS and non-conforming sector," said one industry source. "The deals for this week should see healthy pricing as more pressure begins to be added to the mezzanine side."
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