The asset-backed market slowed down a bit last week, showing moderate activity for quarter-end with close to $3 billion in issuance for the week (6/22/00-6/28/00).
As we close the quarter out, and reflect on the most recent major events, it is clear that autos seemed to shine and dominate at the end of the second quarter, with the huge supply and record-breaking issuance that hit the market in June. The spike in supply caused auto-backed spreads to widen and gave the investors the opportunity to pick and choose what deals to take part in.
The credit card sector brought news as well, with the market seeing several large deals that were done through reverse inquiry.
But as we close the doors to the first half of 2000, the equation that market players will be trying to figure out while enjoying their Fourth of July holiday is what is in store for the second half.
"I think the theme that is sort of out there certainly is that a lot of people are sort of sharpening their pencils and scratching their heads saying, Well, what's supply going to look like for the rest of the year?'" asked one market source. "I think most people are kind of agreeing that we'll see less supply than we did on par with last year's estimates or numbers."
Historically, when the market approaches quarter-end, asset-backed spreads typically widen out as dealers are forced to reduce their holdings. One source noted that there seems to be a change of pace in that aspect, due to the low inventory that has been seen on dealers' balance sheets this year.
"Because it's been thin, you're not seeing dealers pressured or forced to remove these assets off of their balance sheets, simply because it just ain't there," said the source. "They haven't been because everybody has been typically cautious. The typical factors that we have seen in the past that has caused spread widening at the quarter-end is not evident this year."
Going forward, the market can expect to see a significant decrease in the home-equity sector, compared to numbers seen last year. Mainly to blame is the exit of major players such as Conseco Inc. and the shutting down of The Money Store (see p.1), which has most investors examining the sector far more closely, proceeding with caution.
"I think what we're going to see is issuers that used to be big securitizers not be as big in this sector as they have been historically," one analyst said.
As far as this week goes, one industry source described it as being as "dead as a doornail", advising most to "just go to the beach."
And don't look for much asset-backed supply either. The market may hear of deals in the works, but in terms of deals actually pricing, very little is expected. Some predict that issuance will pick back up the second and third weeks of July.
"I would be very surprised if you saw anything get done," one source said.
At press time, there was just one lonely deal in the pipeline. Alliant Foodservice was pre-marketing a $300 million trade receivables deal. The Erisa eligible multi-tranche structure, was expected to be rated by Moody's Investors Service and Standard and Poor's Ratings Services.
