In recent months, the securitization market had come to rely on the consumer ABS asset classes to sustain production, while the subprime MBS and CDO markets retreated. Last week, however, that small group itself-comprised of credit card, auto and student loan ABS-began to look winded.
Although market sources said they did not expect to see the credit card and auto sectors generate severe problems in the near future, they did acknowledge that payment rates, which had slowed from already historic lows, were a sign of overall weakness in the financial health of the U.S. consumer.
"We're seeing the spread of some problems to [the] credit card and auto sectors," said one trader.
Not even the anticipation of the IMN's ABS East could do much to pick up the near-term pace of production. "It's going to be relatively quiet going into this [year's conference]," said the trader, who added that he did not expect the event to be as well attended as last year's.
That market professionals were preparing to fly to Orlando for the conference was enough to drag the market down. Added to overall doldrums were persistently wide spreads that discouraged some issuers from pricing their deals when they would otherwise be eager to complete deals, said the trader.
In recent sessions, the ABS market managed to come to market with slightly more than $2.8 billion in transactions. Three of the four deals were secured by credit card receivables.
American Express Issuance Trust, both Series 2007-1 and 2007-2, came to market on Oct. 26. Identical for practical purposes, the Amex deals were completed with a long list of lead managers and comanagers. Banc of America Securities, Barclays Capital and Lehman Brothers were among the lead managers, while BNP Paribas and Morgan Stanley were two of the comanagers.
Although they were structured very similarly, pricing on the tranches varied noticeably. On Series 2007-1, the triple-A piece priced at one-month Libor, plus 20 basis points, for example.
Another credit card deal had come to the market by early last week, the $800 million Citibank Credit Card Issuance Trust, led by Citigroup Global Markets. The issuer priced the A'-rated notes at one-month Libor, plus 62 basis points. RBS Greenwich Capital and Merrill Lynch acted as comanagers on that deal.
At least one RMBS issuer was preparing to brave the current environment. The Citigroup Mortgage Loan Trust Inc. was prepping a $337 million residential MBS deal.
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