Asset-backed trading was slow last week, as a large portion of the ABS community attended the annual conference in Bermuda.
The tone in Bermuda, however, was positive, and it looks to be an active fourth quarter, through November at least, and on again at the start of the new year (see Investors, p. 1).
"I think there's a decent chance that we make it to $200 billion [for the year]," said a source at Salomon Smith Barney. Current year-to-date industry totals are at roughly $163 billion. "You know we had a $63 billion quarter. I think the low-end prediction [for the fourth quarter] is probably $30 billion. I think the high-end is probably $40 billion."
Though the week was quiet, the Federal Reserve early last week kept interest rates at bay, leaving the door open for issuers, according to a source close to the market. Though the Fed made no promise to hold rates steady until year end, Wall Street responded quite positively to the announcement, which, the source explained, probably suggests that most market players think interest rates will stay as they are.
The Pike
With most market movers at the International Management Network conference in Bermuda, there weren't any pricings last week.
At press time, The Saxon Group was pre-marketing the first of two deals, according to Brad Adams, vice president of securitization at Saxon. Last week Saxon roadshowed a fixed-rate home equity-backed deal, structured in four parts, and managed by Banc of America Securities. A $264 million, 3.13 year A-F class will be the largest chunk of the deal, followed by two smaller, 5.68-year tranches.
And Saxon is still resting on a pre-sold floating-rate deal, according to Adams. "The [floating rate deal], as far as I'm concerned is already done. It's just up to the investment bank to make the announcement."
Also last week, Avis Rent A Car Inc. pre-marketed a $1 billion auto lease-backed deal, managed by Chase Securities. The Rule 144A transaction is the first Avis has done through PHH Vehicle Management Services, a division Avis acquired from Cendant Corp. in June, according to Nancy Israel of Chase.
The deal will be structured in two parts, a two-year, $500 million tranche and a three-year $450 million, three-year class, both rated a triple-A. Both will be price off one month Libor, Israel said.
Shrinking Volatility
The predominant feeling, in the wake of Bermuda, is that the asset-backed market is looking rather good for both issuers and traders, and that while it was previously thought supply would be slim going forward, there seems to be volume on the horizon.
"I think people, in general, are seeing volatilities actually fall," said Paul Runice, senior vice president and treasurer of Metris Cos. "Whereas investors were telling issuers to avoid the fourth quarter, at least up until the second quarter of this year, I think now investors are telling issuers, could you please come to market in the fourth quarter.'"
"My point of view," said Runice, "is that investors should be loading up now, because unlike the Asian crisis, unlike the Russian crisis, this is a date-certain event. On Jan. 1, if they get to work, somehow commuting, and the elevator works and gets them up to their floor, and the Bloomberg machine is on, the interest rates will still be low, and things will look pretty good."
