Granite paper continues to climb higher as pricing last week reached its post-crisis high, above 94 for the first time since the non-asset trigger event in November 2008, according Royal Bank of Scotland (RBS) analysts.
"Over the longer term, the rally in the subordinated notes has been even more dramatic, producing exceptional equity-like returns over the past eighteen months," analysts said. "This performance seems to suggest that this transaction is well on its way to rehabilitation."
The price performance of Granite bonds appears to have been driven more by the improvement in sentiment and liquidity in the ABS market generally, RBS analysts said.
Price performance is also holding up on the new issues front, which this month saw placed securitization volume reach €2.4 billion, nearly 20% lower than issuance seen in the same month last year, RBS analysts said.
They noted that Volkswagen's Driver 8 auto deal printed at the tight end of guidance with its short-dated bonds pricing at 70 basis points over Libor. Meanwhile, Lloyds also reportedly privately placed a British pound-denominated senior tranche from a 2010 series of its Penarth credit card master trust.
"Generic senior vanilla spreads today are modestly wider than a year ago, by contrast spreads among mezzanine and junior bonds (for which primary supply remains conspicuously absent) have tightened appreciably, a case in point being GRANM [triple-Bs] which have posted total returns in excess of 70% over the past year," RBS analysts said.
The pipeline, nonetheless, continues to build. According to Societe Generale's Cross Asset Research, a €3.5 billion RMBS deal from Santander's Holmes master trust will offer investors tranches denominated in dollars, sterling and euros. The class A dollar-denominated tranche has been preplaced with investors. Paragon Mortgages is also slated to market a £200 million buy-to-let RMBS transaction, although that transaction is set to hit the pipeline sometime in 2Qll.
A Dutch RMBS from Fortis Bank's Dolphin Master Trust series is also marketing. The proceeds of the sale will partially repay the Dolphin Master Issuer Series 2010-1 A2 notes. The deal's €3 billion A1 tranche will be privately placed.
On the ABS front a £484 million and €284 million U.K. auto ABS from Lloyd's owned Black Horse is also marketing. The deal, Cardiff Auto Receivables Securitization 2011-11, preplaced its A1 and A2 tranches.