Just about three weeks remain on the ABS issuance calendar of 2007, but as every market professional knows, issuers and investors began their winter slumber a long time ago.
Washington Mutual is considering pulling the plug on its mortgage securitization and trading business, according to market sources familiar with the situation, who said the bank planned to announce dismissals in its secondary market workforce by today (see page 11).
Between Nov. 30 and press time on Dec. 6, a mere $4.2 billion in ABS priced. The $1.5 billion SLM Student Loan Trust came to market with four investment banks piled on as lead managers: Citigroup Global Markets, Deutsche Bank Securities, Wachovia Securities and Merrill Lynch. All of the triple-A notes on that deal were priced against three-month Libor, with the two-year notes coming in at 23 basis points over the benchmark, and the 10-year piece pricing at 47 basis points over.
In another four-party pileup, Banc of America Securities, Citigroup, Morgan Stanley and RBC Capital Markets released guidance on another student loan ABS deal. The $1 billion Educational Funding of the South, its second deal for the year, was also priced against the three-month Libor. Pricing for the 2.99-year tranche was expected to be in the mid-30 basis-point area.
CNH Equipment Trust also priced a $487 million deal, with ABN Amro, Barclays Capital, BofA, Citi, BNP Paribas and Deutsche Bank making up the list of underwriters. The notes on that will be secured by loans on agricultural and construction equipment. The current issue deviates slightly from previous deals in that it features a higher concentration of used equipment.
The auto sector also made an appearance, as GMAC sold a portfolio of auto leases to the Capital Auto Receivables Asset Trust. That deal also came to market via Citigroup, which managed to price the $2.3 billion transaction at spreads that were relatively tight in this environment, but still wide in comparison to similar deals completed just a year ago.
The prime rated, short-term piece priced at Interpolated Libor plus 15 basis points, while the 1.14-year tranche came in at 78 basis points over the benchmark.
Bear Stearns appeared to be preparing a couple of mortgage-related transactions totaling $532 million, via its "Structured Products" and "Asset-Backed Securities" trusts. Generally speaking, however, market participants seemed unimpressed by the prospects of any good transactions coming out of the MBS sector soon.
"There are some deals out there, [but] you cannot believe the pricing that you are seeing," one trader said, while not alluding specifically to the Bear Stearns deals. "It's doubtful that a lot of the deals are getting done."
CMBS deals were absent from the lineup this week, too, a consequence of market conditions having gotten extremely difficult. Most dealers are trying to short sell the triple-A-rated securities, because selling securities throughout the entire credit stack is proving to be very difficult, said that trader.
The student loan transactions and the auto loan deal bore that out, as did most deals that were able to price in the last several weeks.
Suppressing an already soporific market is the fact that many market players are trying to strategize. "What we're trying to do is figure out where the inflection point is," the trader said.
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