The asset-backed market took a bit of a break last week, as it awaited news from the Federal Open Market Committee that short-term interest rates would be slashed by another 50 basis points, and geared up for the Arizona conferences taking place this week (see story, p.3).
"There's still a lot of pent-up demand from the end of last year, but everyone was waiting to see what happened in the markets," said Russell Hurst, director, asset-backed research at First Union.
First up in the market last week was MBNA with a $1.25 billion credit card deal. The $1.06 billion senior class priced at 15 basis points over the one-month Libor, which was in line with talk.
Countrywide Home Loans Inc. also hit the market with a $460 million HELOC transaction. The deal, wrapped by Financial Guarantee Insurance Corp. and lead managed by Countrywide Securities, also priced in line with talk at 24 over one-month Libor. Countrywide is currently marketing a $1.1 billion home-equity deal slated to price sometime this week.
World Omni Financial Corp. priced its $709 million auto-loan deal last Thursday. The $173 million one-year tranche priced at 14 basis points over EDSF, two basis points wider than talk. First Union and Credit Suisse First Boston jointly managed the transaction.
Currently in the pipeline is a $250 million home-equity deal from First Franklin that is being led by Greenwich Capital Markets. First Franklin last issued in the fall of 2000.
Metris Companies is also marketing a $610 million floating-rate credit card deal, upsized from $500 million. Buysiders that have held Metris positions in the past said the new issue at 22 basis points over the one-month Libor on the Class-A is fair value, market sources said.
The influx of home-equity deals into the market could be attributed to investor demand on the longer end of the curve.
Furthermore, the swaps yield curve is the steepest it has been since the summer of 1999, according to analysts at Banc of America Securities. The spread between 10- and two-year swaps has gone from an almost two year low of 12 basis points, to an almost new high of 75.5 basis points on January 29. The steepness, according to BofA sources, should make longer fixed-rate paper more attractive.
"What we're finding is on the short end, a lot of the premium paper is being sold and people are investing out the curve into prime auto and also into home equities," Hurst said. "So we've seen a big redeployment out the curve."
