With the euro-denominated tranche of HBOs Permanent Financing bid slightly below par, market sources say the hefty upcoming pipeline is beginning to weigh on the market. Investors are monitoring secondary market activity to get some idea of where spreads are headed, and it looks like the market might have just a little room to tighten further.

"We believe that the market is growing full on prime U.K. RMBS collateral," said analysts at the Royal Bank of Scotland. "Despite this modest weakness, paper in other classes is generally well-bid, but we do not expect the markets to collapse but rather to stabilize for the time being."

Continental RMBS spreads remain stable, and Dutch and Spanish RMBS have continued to come in tighter. The differential between U.K. and Dutch/Spanish RMBS has narrowed. "Price talk for Holmes No. 8 is slightly back from where both Permanent and Granite are currently trading, which, as with previous issues, reflects differences in pool characteristics and performance," said analysts at Dresdner Kleinwort Wasserstein. "What is perhaps more notable is that the price talk for the Holmes five-year euro, triple-A tranche is just one basis point outside where benchmark Dutch and Spanish RMBS are trading."

The slowdown in prime U.K. RMBS secondary market activity may make it challenging for Holmes to get done. According to market sources, Holmes 9 s structure by value is currently 64% U.S. dollar, 20% euro and 16% sterling-denominated notes, and includes a large $1.85 billion, 1.04-year money-market tranche. Four series are offered, including short-dated one-year dollar tranches along with a 2.8-year dollar series, a 4.3-year euro series and a 4.8-year dollar and sterling series.

The $1.85 billion money-market tranche was talked at four basis points over Libor, and the 2.8-year and 4.8-year dollar pieces were talked at eight basis points and 15 basis points, respectively. Its 4.3-year euro triple-A piece was talked at the 15 basis point area over Euribor, and the 4.8-year sterling-denominated triple-A tranche was talked at 16 basis points over Libor. The deal is expected to price this week and is said to be at least 1.5 times oversubscribed.

The seventh deal from Brittania's Leek Finance series, Number 12, was reported well oversubscribed. Books on the mezzanine and below classes have gone subject to current level of price guidance. Unlike many U.K. non-conforming/subprime RMBS, this deal is structured without detachable I/O coupons or MERC strips, which means that more excess spread will be available to support it. JP Morgan and RBS lead the deal.

Approximately GBP630 million (US$1.15 billion) of 2.5-year triple-A notes issued in euro, dollar and sterling are marketed at guidance levels of 23 to 25 basis points. The GBP28 million (US$51.3 million) double-A piece is talked at the 50 basis point area, GBP24.5 million (US$44.9 million) single-A notes are talked at the 85 basis point area and GBP17.5million (US$32.08 million) of triple-B notes are at the 185 basis point area. In addition to the new mortgages, the transaction includes mortgage loans from two older Britannia transactions redeemed in March 2004 - Leek Finance Number Two Plc. and Platform Home Loans No. 2 Plc.

Approximately 1.5 billion (US$1.8 billion) of CMBS paper from Morgan Stanley's EloC conduit is expected in the market over three issues. The deals are expected to be Italian, French and U.K.-based. The first deal from the benchmark CMBS originator is expected to be a 320 million (US$395 million) transaction backed by Italian loans. The second will likely be a 400 million (US$494 million) deal backed by French loans, and the third a GBP500 million (US$916 million) deal backed by U.K. loans

Also circulating in the pipeline is a new EETC deal for Iberia Airlines. The airline is expected to issue a transaction backed by 20 airbus aircraft through BNP Paribas.

"Appetite for aircraft risk has been light in recent years due to concerns in the industry and heightened terrorism risks but may present an opportunity for yield in current markets," said analysts at RBS. The issue will be structured into three tranches that will include one piece backed by a subordinated liquidity line; a second equity piece issued through Iberia's Japanese arm of leasing companies; and a third to be subscribed by banks familiar with the airline.


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