The European market was still busy last week, with last-minute additions to the busy calendar ahead of the anticipated quiet of the August repose. The pipeline grew by a few transactions, offering a preview of action reserved for September business.

Permanent Financing priced its 6 billion (US$7.35 billion) deal, boosting July supply to the 12 billion (US$14.7 billion) mark. The deal priced a few basis points outside its previous transaction, bringing primary spreads in line with secondary trading, said sources. The U.S. dollar tranches continued to garner support as the structure saw these notes upsized by GBP500 million (US$922 million). The 2a7 short dated tranche priced at 2 basis points below Libor, while the 2.8-year class A notes priced at 11 basis points over Libor. The 4.8-year notes priced at 16 basis points over three-month Libor.

On the non-dollar front, the 5.3-year class A notes were offered at 17 basis points over Euribor and the 6.9-year sterling-denominated notes priced at 19 basis points over Libor.

Triple-A U.K. RMBS notes are trading at levels seen at the start of the year, but further down the credit curve - at the single-A and triple-B level - notes remained 12 basis points and 25 basis points tighter, respectively.

Despite the already hefty supply calendar in the run-up to the August cooldown, more issuers were lining up, showcasing a plush supply of new deals still to come. It contradicts earlier indications that there would be a slowdown in master trust issuance in the second half of the year.

On the heels of Permanent, a new Holmes deal from Abbey National is expected to debut after the August break, said market sources. Chatter puts the deal at GBP3.5 billion in size (US$6.4 billion) with a large chunk dominated in U.S. dollars. The Abbey deal suggests that master trust issuance will still remain part of the business order in the second half of this year.

"We had fully expected master trust RMBS issues to quiet down following the raft of deals earlier this year, but the structural emphasis has shifted toward shorter duration notes, implying to us that activity may continue as an alternative funding exercise until Basel II rules are implemented," reported analysts at the Royal Bank of Scotland.

Northern Rock also announced a 5.7 billion (US$6.9 billion) deal under its Granite master trust. This will include dollar-, euro- and sterling-denominated paper. The new deal will incorporate an uncharacteristic 2a-7 money-market tranche, not usually seen in the second half of the year from European master issuers, sources said.

From the nonconforming RMBS front, a new GBP460 million (US$848 million) transaction for Preferred Mortgages Ltd debuted and is expected to price before the holiday lull. PRS 8 will offer investors tranches in sterling, dollar and euro denominations. The structure includes two 3.1-year, triple-A rated classes, two 5.2-year double-A classes, two 5.2-year single-A rated classes and two triple-B plus 5.3-year classes.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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