The market has not yet plunged into its seasonal slowdown - though it's clearly approaching - as last week's business was more about counting the post-August deals expected to emerge when the market returns from holiday.

Analysts at Merrill Lynch said that spread direction following the lull is the key concern for market participants. Despite the recent flood of paper, the supply-and-demand scenario continues to rock pricing at the tighter end of talk. Last week, Preferred Mortgages priced its GBP460 million (US$835million) nonconforming RMBS transaction inside of talk. The euro-denominated tranches came inside the sterling paper across the structure, indicating that the demand for euro paper remains strong.

But as the market transitions into the second half, analysts expect diverse asset types and new structures to join the mix, adding some spice to the monotony of RMBS seen to date.

According to Moody's Investors Service, the pipeline is growing, and all of the major European ABS sectors should see representation before the end of the year. Among the sectors noted in the report were autos, credit cards and leasing deals. Moody's estimated that, so far this year, funded European issuance rose to e24.1 billion (US$28.8 billion).

The agency also expects a busy beginning of the 2005 for U.K. credit card transactions, following increased activity throughout the second half of 2004. The agency noted the debut of MBNA's delinked credit card structure, which, over the past fortnight, has placed several rounds of paper with investors from its CARDS series 2004 delinked structure.

Last week, the structure issued GBP300 million (US$544 million) of triple-A paper at 18 basis points over Libor with a 6.95-year average life. More than e2.2 billion (US$2.6 billion) of issuance is available for issuance going forward, market sources said. Despite only two weeks to go before the market literally halts (should time hold true), approximately e4.5 billion (US$5.4 billion) is still expected to price.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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