European primary market RMBS issuance has been light in recent weeks, which is typical for the month of August. Only three mortgage securitizations have come to market in the past month. However, these includes the third largest multi-currency RMBS print to come to market to date, via the GBP5 billion ($9.46 billion) transaction from the Royal Bank of Scotland's Arran Mortgage Funding program.

RBS will lead manage its own bond sale that has on offer tranches denominated in U.S. dollars, euros and sterling. It's the second deal for the bank in as many months after having taken a 13-year hiatus from the RMBS market. RBS sold a GBP4.7 billion RMBS deal in June, and this summer the bank also issued GBP3.5 billion worth of corporate lending risk from its balance sheet through a CLO.

The latest RBS deal is backed by mortgages issued up to 2004 by National Westminster Home Loans, a wholly owned subsidiary of RBS. The previous deal was backed by RBS-issued mortgages. Marketing for the bond, which will be sold in September, began in the U.S. and was followed up with marketing in Europe recently. Pricing is expected to follow the roadshows.

Other RMBS players

One of the more prolific issuers of U.K. RMBS, Northern Rock also joins the September pipeline with plans to issue a GBP4.74 billion RMBS deal. Citigroup, Lehman Brothers and UBS are the lead managers for Northern Rock's latest multi-currency RMBS. The deal is expected to launch and price this week.

Outside of the U.K., Russia continues with its RMBS developments. According to market reports, Moskommertsbank, a subsidiary of Kazakhstan's Kazkommertsbank, plans to issue MBS worth about $150 million. The transaction is slated to come to market by the end of 2006 or beginning of 2007. The deal is expected to follow the two earlier issues to come for Russia this year.

More activity

U.K. and other European banks have aggressively stepped up their securitization programs in the past year as they look to raise funding and transfer credit risk off their balance sheets. HSBC and Lloyds TSB, the only banks that have not yet issued, have already announced intended sales that are set to be completed this year.

"As far as we can see, the near-term RMBS pipeline looks light in terms of deal flow, but volumes should be amplified by the large prints expected via Northern Rock and RBS," said Deutsche Bank analysts. "Still, on a net basis, U.K. RMBS volume growth should be much more modest than new issue headlines would otherwise suggest, owing to redemptions in Q4 2006. Coupled with the strength of demand technicals currently, we expect RMBS spread performance to be better supported going into the fourth quarter, all else being equal."

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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