The Whistlejacket bid list traded at tighter levels than prevailing secondary market spreads for structured finance securities. This might be a sign that liquidity and investor interest in the sector is improving, Fitch Ratings said today.

As a result, secondary market prices may begin to place a greater weight on credit risk fundamentals, compared with liquidity concerns, general negative sentiment and other price determinants. The latter three have dominated market prices for most European structured finance securities since the global credit crisis began in July 2007.

The successful placement of large portions of the Whistlejacket vehicle, which are understood to have yielded an average price of 67.1% of notional, might lay the foundation for a tightening in secondary market prices and could encourage greater trading activity. Whistlejacket was originally placed into receivership in February 2008.

"Government initiatives, such as the recently announced guarantee scheme for U.K. RMBS, that address specific investor concerns, for example about extension risk, may reduce the impact of non-credit related risks on pricing," says Ian Linnell, head of structured finance for EMEA at Fitch. "Such initiatives may therefore encourage a greater alignment between market prices and the value implied by the fundamental credit risk."

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