Not even a too-close-to-call presidential election could rattle the asset-backed market last week, as approximately $12 billion to $14 billion in issuance priced. And it shows no signs of slowing down.
The election did little to the asset-backed market except push swap spreads out slightly. "The stock market sell-off, and swap spreads are softening a little bit, but I don't think ABS spreads relative to swaps have been affected by that," said an ABS trader.
However, a $489.7 million recreational vehicle deal from The CIT Group was pulled from the market last Thursday, after the company decided not to seek funding in the ABS market.
"We just made a decision ... we wanted to access a different part of the market for funding for this portfolio," said Frank Garcia, senior vice president at CIT, adding that it had nothing to do with the performance of the portfolio or market conditions. "The deal was going fairly well. It's just that when you have the luxury of choosing your funding sources, sometimes it leads to pulling deals like this."
Otherwise, it was an overall busy week. Notable transactions were seen in the credit card and auto sectors. A $600 million auto receivables offering from AmeriCredit Corp. priced, with the two-year fixed-rate tranche and the three-year floating-rate tranche pricing at the same spreads, which "underscores the comparative advantage that issuers have to issue floating-rate bonds in that sector right now," and ABS trader said.
MBNA Corp. brought a $750 million credit card deal to market, with the five-year tranche pricing the tightest among comparable deals this year at three-month Libor plus-11. Frequent issuers such as MBNA helped keep the market moving and liquid.
"Generally, in a period of very heavy supply, the benchmark deals perform better and are well received," said an ABS trader. "I think you saw that with the MBNA five-year floater. Heavy supply has pushed out a few of the less liquid names, but I think the benchmark, commoditized names have held in very well this week."
Other familiar names in the market last week included credit card deals from Household International ($1.2 billion) and Providian Financial Corp. ($675 million) and Advanta Corp. ($387 million). Auto deals from Mitsubishi Motors ($924.8 million), Nissan Motor Co. ($698.5 million) and Western Financial Services ($1 billlion) also priced last week.
"All the auto and credit card issuance was fairly well received," an ABS trader said.
"Pricing levels have hung in very well, and doesn't seem to be showing signs of erosion," said Alex Roever, head of ABS research at Banc One Capital Markets.
After Prudential Securities' exit from the home-equity sector two weeks ago, HEL spreads that had widened five to 10 basis points have tightened back to their previous levels.
"We've seen spreads recover pretty much back to where they were, as several dealers stepped in and enhanced the liquidity and got things back in check," a trader said.
Going forward, investors seem to be preferring three-month Libor floaters. "Given the differential between three-month Libor and one-month Libor right now, there's kind of a spike in the curve to take you over year-end funding, which is going to result in a higher coupon set for the next two months or so," said a trader. "So I think that may be why these three-month Libor deals are going so well."
This week, be on the lookout for an auto receivables deal from one of the Big Three, as well as at least one credit card transaction. Sources could not confirm specifics as to whom those players will be.