The U.S. ABS primary market priced approximately $3.1 billion of new issuance last week, down from more than $18.5 billion sold the week prior, closing out a month which saw nearly $50 billion of supply.
Unlike most of the month, the volume last week came from the credit card sector, with two sector benchmark names pricing deals; however, the auto loan, student loan and home-equity sectors were each represented.
With credit card supply lagging this month, the presence of both Chase Manhattan and MBNA was a welcome sight for the buyside. Chase offered a three-year floating-rate transaction that closed out at $1.4 billion in size, following an upsizing. MBNA priced $750 million of 10-year floaters from its "MBNAseries" de-linked issuance vehicle.
Chase priced its second credit card deal of the year and its fourth self-led ABS since the Feb. 26 pricing of $2 billion of auto loan paper. The three-year CCCMT 2002-2 deal, sold via JPMorgan, saw strong demand that pushed the size of the deal to $1.4 billion from the initial $1.19 billion.
The $1.176 billion triple-A rated three-year senior A-class priced with a coupon of five basis points over one-month Libor. The single-A and triple-B-rated subs priced with coupons of 33 and 90 basis points over one-month Libor.
As has been the case for some time in the card sector, the increase in size did not negatively impact pricing spreads.
The five-over-Libor print is the tightest of the three-year sector of the primary this year, tying the three-over-three-month Libor print that Citibank completed on Feb. 1.
MBNA, tapping the market for the fourth time this quarter, launched a $750 million 10-year floating-rate deal, which sources said was largely reverse-inquiry driven. The single-tranche 2002-A3 offering priced at 24 basis points over one-month Libor, the first floater of the year for the top-tier issuer.
MBNA also sold five-year single-A and 10-year triple-B-rated pre-enhancing subs on Feb. 20, both of which were fixed-rate. On Jan. 23, MBNA sold five-year triple-As - also with a fixed-rate structure.
In general-purpose credit cards, some further tightening is possible, notes Banc One Capital Markets researcher Alessandro Pagani, citing the historical tights seen in the sector.
"Historically, spreads on five-year, fixed-rate credit cards were at or sub Libor for almost a full year between 1997 and 1998. It is possible that spreads on senior classes will continue to grind tighter over the next few months. However, we believe that room for improvement appears limited in triple-As," Pagani notes in Banc One's most recent ABS Market Update.
Of course, back in 1997, Libor was set within a range of 5.461% to a high of 5.852%, where a minus10 basis-point coupon topped 5.50%, an approximate 400 basis-point pick-up versus a coupon set flat to one-month Libor in this market.
In student loans, which have had a slight resurgence in recent weeks following an almost quarter-long slumber, NELnet priced an auction-rate transaction that came in at $564 million. Although the issue was priced off the municipal desks of joint leads Banc of America and JPMorgan, it was a taxable security, with a 32-year tenor.
The structure contained seven triple-A rated classes, indexed to one-month Libor, which will reprice and reset monthly. All classes came in with a coupon in the 2% to 2.05% range, or between 10 and 15 basis points over one-month Libor.
