Last week's asset-backed market showed a holiday slowing - a screeching halt, really, considering the $5 billion-plus in issuance the prior week.
At press time, however, there were still remnants of a substantial pipeline, and most players agree that if the deals weren't executed early last week, they'll close this week.
"Issuance won't grind to a complete standstill," an ABS analyst predicted. "You'll still see maybe the small-type deal get done - the $100 million of this, or the $200 million of that."
Other than the small types, there are few certainties as to what we'll see in the month to come. "Everybody's throwing darts at the board at this point," said the analyst.
Essentially, there are a few major factors that play a role in the market going forward. "First, I think a lot of issuers had basically planned to not issue in December anyway," the analyst explained. "Way back when, a lot of them said, Okay, for 1999, we're going to do all our issuance from Jan. 1 until Sept. 30 or the middle of October and that's it."
That being said, the market seems to be in fairly good shape at this point, and the feeling is very positive, because, the analyst said, the Y2K concerns were, for all practical purposes, overblown.
However, regardless of whether issuers would like to come to market, they may be forced to watch the fourth quarter roll by, as supply is - as planned - at lower levels.
Toward the year's end, there don't seem to be any factors threatening spreads. "On quite the contrary, you're probably seeing a lot of investors that are more in cash than they'd like to be," the analyst said.
If these investors are able to find deals, they're likely to buy. Most market players see little spread volatility, and project, if anything, a slight tightening.
The First Two Weeks
Deals are expected to resurface on Dec. 1 - however, on the same day, watch out for a one-month Libor blip, as the benchmark wheels over the first of the year. Recall a 50 basis point leap in the three-month when it crossed the line in October.
Since the three-month Libor kicked up 50 basis points, one-month Libor is expected to rise 18 basis points to 20 basis points, the source suggested. "It's built into the dynamic at this point, so it may be very well muted."
Chris Flanagan, director of ABS research at Merrill Lynch & Co., pegs total home-equity issuance for the quarter at $12 billion to $14 billion, which is near expectation, he said.
"Basically, on the manufactured-housing side of the market, what we're looking at is not really any activity for the rest of the year," Flanagan said. However, he predicts we'll see $3 billion to $4 billion in home equity deals within the first two weeks of December.
As far as chance comers, market spectators agree that the doors are still open for the larger companies that always have supply on tap - such as first-tier credit card issuers and auto finance companies.
Beyond the Door
Most analysts decline to go on record with a solid projection of the market past Dec. 31.
"As we come into the year 2000, I think that it's in fact a wildcard," said one analyst. "Will issuers do deals right out the shoot in the year 2000? Probably not. Like with everything, they'll say let's see January come, let the dust settle - if there's any Y2K concerns, let them get flushed out earlier rather than later.' And then if we do see supply come, it will probably be a February type of thing."
The new year will most likely look similar to patterns in the past, where the first two or three weeks of January are quiet, as issuers and investors are looking back, adjusting their thoughts and strategies for the year.
"I think it's going to be one of those things where it's going to be a slow pick-up," the analyst said. "But I do think it's going to be a good market tone going into the new year."