The ABS market got off to a robust start last week, as issuers posted $5.3 billion in deals on Monday. There was good news and bad news coming from the subprime residential mortgage sector. One-month prepayments of fixed- and adjustable-rate subprime RMBS declined across most vintages in February, according to Michael Youngblood, managing director of ABS research at Friedman Billings Ramsey, a trend that is expected to continue through March. At the same time, however, default rates also rose across most vintages.
Also early in the week, Treasury yields inched up eight basis points after a speech by Federal Reserve Chairman Ben Bernanke downplayed the effect of the yield curve on the broader economy and triggered a sell off. This left some room, at least early on, for asset-backed securities to reap some benefits from flagging investor demand for Treasury debt.