There was light activity in the asset-backed market last week as Wall Street waited for the Federal Reserve Bank to announce its 50 point rate hike.
"It's good news that the hike was probably in line with what the majority of market expectations," said an ABS market analyst. "Hopefully what that does is bring a level of stability into the market."
Further, the rate hike could add liquidity and demand to short-end fixed-rate product, now that interest rates are at a nine-year high. With this in mind it's likely that there will be a pickup from issuers who traditionally issue fixed-rate bonds, the analyst said.
"Now we have an interest rate environment that for all practical and technical purposes should actually be at a point where we think - for the short term at least - that it will provide a good backdrop to begin bringing supply," the analyst said.
For fixed-rate paper, the preference should be for three-year and in, which could set a good framework for fixed-rate auto pools to get in done, the analyst predicts.
Prior to the rate hike, Countrywide Home Loans priced a 17-part home equity deal via lead managers Bear Stearns and Countrywide Securities. The deal was $1.4 billion in size, and sold as sen/sub certificates.
At presstime, Triton Aviation was out with its $720 million aircraft lease-backed transaction, managed by Chase Securities.
Also making noise, Lehman Brothers was preparing a $700 million manufactured housing securitization backed by a mixture of a portion of the loans it purchased from Conseco Financial Corp. and loans directly from Conseco's portfolio, according to published reports.
Partners First
Of interest last week, the 1998-2 and 1998-3 pools of Partners First Credit Master Trust reported negative 1.32% excess spread for April, which could place the bonds on credit watch by the ratings agencies.
"We haven't seen this happen in a credit-card master trust since probably 1997, or 1998," said Jeff Salmon, head of ABS research at Barclays Capital. "If you look at all the other trends in the credit-card sector right now, this is really an isolated event."
Partners First Management was acquired by Wachovia Bank earlier this year. The negative excess spread was the result of a combination of events, including increased bankruptcy filings and a one-time problem associated with the servicing transfer.
"We've seen this in the past with credit-card issues," Salmon said. "A key question for anybody who holds these bonds would be, what does that mean for the bonds I hold, is there an increased chance of an early amortization?'"
An early amortization is forced if a credit-card trust shows three consecutive months of negative excess spread.
However, Wachovia plans to add approximately $500 million in new accounts to the portfolio to set it back on track. Wachovia will likely have a very positive and strong May and June to counter the negative April.
"In this case they're going to hand pick out Wachovia-originated accounts and add them to credit-card master trust," Salmon said.
Though the bonds widened on the news, Salmon believes the recourse will be sufficient to avoid an early amortization event.
