The first two weeks of 2001 were the strongest start to a year the U.S. asset-backed market has seen, and the stage is being set to make January 2001 the best January ever.

In the first 11 days of the month, almost $5 billion in issuance was recorded, according to Thomson Financial Securities Data, with credit cards and autos taking most of the credit. In comparison, only $109 million was placed during the same time period last year, and none for 1999. In 2000, January issuance totaled $8.3 billion.

Discover Financial Services conducted the first deal of the year, a $1.16 billion floating-rate credit card transaction. Morgan Stanley Dean Witter led the upsized transaction, which priced last Monday. The deal priced at the tight end of talk, with the $1.1 billion senior class pricing at one-month Libor plus 16.

Following on Discover's footsteps was General Motors Acceptance Corp.'s $1.77 billion auto receivables deal. The transaction was placed through its Capital Auto Receivables Trust, and pricing for the fixed- and floating-rate tranches was at the tight end of talk or tighter. The Credit Suisse First Boston and Merrill Lynch-led deal saw the $526 million triple-A rated one-year tranche price at EDSF plus 8, two basis points tighter than guidance.

Also in the auto sector, Toyota Motor Credit Corp. priced a $1.18 billion transaction last Thursday. The $400 million one-year tranche priced at EDSF plus 9, one basis point tighter than talk. Merrill Lynch and Deutsche Bank led the transaction.

In the pipeline, the Public Service Electric & Gas unit of New Jersey utility Public Service Enterprise Group is planning to issue $2.5 billion in stranded-cost bonds. That deal is scheduled to close at the end of the month (see story page 5). Rumors also abound that Citigroup will be coming to market with a large credit card transaction.

With 2001 getting off to a good start, Moody's Investors Service has predicted that there will be a 10% increase in ABS for the year, with most of the growth coming in the stranded costs and credit card sectors.

In a recent report, Moody's is projecting $230 billion in ABS issuance this year, with $60 billion coming from the credit card sector and $10 billion from stranded costs.

Kent Becker, a senior vice president with Moody's, stated that many card deals, totaling $36 billion, are expected to mature this year, leaving room for additional securitization.

"Citigroup, for example, was not incredibly active last year, and they could be more active in 2001, which could certainly boost credit card volume," he said.

Stranded-cost securitizations totaled only $1 billion last year. "We project $10 billion this year based on the fact that a lot of the legislation has been worked out; legal challenges should be resolved. There are some utilities that have deals on tap," Becker said. Besides New Jersey, Connecticut, Michigan and Texas also have deals waiting to be launched.

Other sectors are expected to have good years, though growth should be flat compared to last year. Student loans are expected to show a decline, and auto sales are expected to decrease, which will lead to slightly less prime auto issuance.

"But subprime could be boosted by that because more people buy used vehicles," Becker said.

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