This has been the busiest January in the history of the asset-backed market, with over $20 billion in issuance placed as of January 25. Citibank led the way with two deals totaling $3.5 billion, while Public Service Electric & Gas followed slightly behind with $2.5 billion in stranded-cost bonds.
Citi hit the market with a one-two punch: $1.25 billion of seven-year notes that priced at 17 basis points over the three-month Libor last Tuesday, and $2.25 billion in five-year notes that priced at 12 over the same benchmark, the next day.
First USA also returned to the market, after a year and a half absence. The $892.8 million deal priced comparable to other more frequent credit card issuers, with the $750 million tranche pricing at 15 basis points over the one-month Libor.
"For an issuer who's been absent for the past year to come back into the market again, that's pretty impressive to price a deal and investors say, I'm comfortable, I know that issue,'" said Jeff Salmon, director of ABS research at Barclays Capital.
In the auto sector, Nissan Motor Credit Co. priced a $1 billion deal via J.P. Morgan Chase. The $350 million one-year tranche priced at 12 basis points over EDSF. Also, AmeriCredit placed a $1.4 billion deal. The one-year fixed-rate class priced in line with talk at 15 over the EDSF.
However, the corporate bond sector is beginning to see spreads come back in after being wide for so long, which may dampen auto issuance down the road.
In the short term, there are no signs that the ABS pipeline will slow down. Issuers want their deals placed while spreads are still tight and technicals are good.
"I don't see anything that's going to derail the good times," Salmon said. "If we don't price something now, the next two to three months there could be a lot more supply; there could be a traffic jam of supply and that's when spreads could come under pressure. Everything is playing to favor in the asset-backed market right now."
The PSE&G deal was twice oversubscribed, and priced at rather competitive levels. The eight tranche deal priced in line to three basis points tight of talk, seeming to ignore all the problems the California utilities are experiencing.
"Two-and-a-half billion being heavily oversubscribed is one thing," said Jason Farago of Lehman Brothers, which lead managed the deal. "[But] this being a utility, and the backdrop of whats been going on in California... it makes it even more remarkable."
"They were able to say and convince the investors, California is California, New Jersey is New Jersey,'" Salmon added. "It was a smart move on the part of the lead managers. [It's] another vote of confidence in an asset class that is currently being questioned."
