The primary issues market has virtually deafened secondary market activity. RMBS transactions continue to dominate, with Italy and the U.K. leading the pack.

"Investor demand appears to have been somewhat limited thus far in 2003," reports Deutsche Bank. "We expect the heavy new issue calendar to test both the robustness of current trading levels and the market's view that investors have long cash waiting to be put to work."

Part of the pipeline is the $567 million equivalent U.K. non-conforming mortgage deal for Southern Pacific Mortgages. The deal is led by Lehman Brothers and will include class A1, A2 and A3 tranches of triple-A rated notes wrapped by Ambac. It will include the first Euro tranche for a U.K. subprime deal. According to Dresdner Kleinwort Wasserstein, this is the sixth deal in the series, but the only one to include a wrap to achieve a triple-A rating. "SPML is trying to reduce its cost of funding," said the bank. "Its existing deals currently trade in the 50s over Libor, whereas wrapped RMAC paper trades some 15 to 20 basis points tighter."

On the prime side, the second transaction emerging from the HBOS Permanent Financing master trust began marketing this month as well. The $6.8 billion equivalent transaction will be the largest U.K. RMBS to date. JP Morgan and Lehman Brothers will act as lead managers on the deal.

Italian RMBS last week included IntesaBci Sec 2 Srl, which is said to be marketing its short-dated 1.5-year triple-A notes in the high teens over Euribor. The longer-dated paper with a 4.6-year average life has guidance at 28 to 30 basis points over Euribor. Banca Antoniana Populare Veneta's $723 million equivalent RMBS transaction, Giotto, is talked around 30 basis points over Euribor for its 4.4-year average life tranche. According to market sources, the disparity in pricing may be due to the fact that IntesaBci has a lower weighted average LTV of 38%, whereas Giotto is currently at 58%.

The Italian Treasury doesn't seem to be quieting down plans for more securitizations. The next deal is expected to be between $3.2 billion and $3.6 billion equivalent for Cassa de Depositi e Prestiti (CDDP). According to sources, the deal will be backed by long-term loans between CDDP and public sector entities.

Copyright 2003 Thomson Media Inc. All Rights Reserved.

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