Just like short-term spreads on several deals, the ABS primary market spigot tightened up a bit more last week, with just $4.2 billion in deals coming out by press time.
Sluggishness in the subprime market was partially to blame, as well as a prolonged seasonal slowdown that had some market players thinking no more than $4 billion in new issuance would be done last week.
"Basically production for the subprime originators was down for February and March. We said volumes would slow down, and now we're starting to see the effects," said one source familiar with the situation.
Home equity loan issuer RFC-RAAC 2006-RP2 was the first out of the gate, with a $317 million deal backed by reperforming loans on Friday, via Credit Suisse, with Citigroup Global Markets and Residential Funding Corp. acting as co-managers. Investors that snagged pieces of a five-year tranche were rewarded with spreads of 50 basis points over the one-month Libor.
AmeriCredit Auto Receiveables Trust 2006-RM followed with a $1.2 billion deal via co-lead managers Credit Suisse and Lehman Brothers. The deal enjoyed triple-A ratings throughout all tranches, but investors' best chance for yield pickup was on the four-year tranche, which priced at 13 basis points over swaps. At least investors got something at the end of the day: the senior piece priced flat to the EDSF.
Countrywide Securities did a $637 million deal, through the Countrywide Home Equity Loan Trust. Spreads on the deal's one-year piece tightened in a bit further from the usual six points over the one-month Libor, to four points over. The four and one-quarter year piece offered fatter yields, coming in at 500 basis points over the benchmark.
Capital One COMET harvested $1.1 billion from the securitization market through two deals, one of which reset the benchmarks on spreads, in one market player's opinion. Barclays Capital and Citigroup Global Markets co-managed the 2006-C1 series, a $175 million, triple-B rated transaction, which offered investors a spread of 29 basis points over the one-month Libor for the five-year deal. Meanwhile, ABN Amro and repeat co-lead manager Barclays Capital co-managed the 2006-A7 series, a $1 billion, five-year triple-A transaction that priced at three basis points over the benchmark.
"I have not seen other consumer ABS tighten to the same extent [as on the 2006-A7]," said one source familiar with the situation.
The mortgage sector delivered the largest deal. CBASS 2006-RP1 came to market with a $2.8 billion deal, via RBS Greenwich Capital. Spreads on the one-year tranche came in at 11 basis points over the one-month Libor, while the five-year piece priced at 40 basis points over. Centex Home Equity Loan Trust did a $980 million deal, with Citigroup Global Markets acting as lead manager. The one-year tranche priced at five basis points over the one-month Libor, while a subordinate piece offered more yield opportunity, at 192 basis points over.
"This week has not been a gangbuster week, by any means," said one trader, adding that some ABS professionals anticipate that 2006 will be a slower year for securitization.
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