With the recent speech given by Alan Greenspan regarding the Federal Reserve Board's take on the slowing economy and interest rates, the asset-backed market began to breathe a sigh of relief that there may be only one more rate increase ahead.
"I think now the major booster is the hint that the economy is somewhat slowing," said one analyst. "Greenspan's comments have given more comfort to people."
Six deals priced in the asset-backed market last week, depending on how you view it (7/13/00-7/19/00), totaling near $5 billion in proceeds, giving an inclination that the market is indeed starting to pick up speed.
Deals that Priced
The biggest offering of the week came out of the auto sector, with the pricing of Ford Motor Credit Co. $1.5 billion fixed-rate transaction. The deal, which was co-managed by Morgan Stanley Dean Witter and Bear Stearns, was a senior/subordinate structure with a soft bullet maturity.
Coming out of the credit card sector was Metris Companies with a $600 million transaction. Due to investor demand, the deal was upsized by $100 million from its original $500 million size.
"It's been a busy week I'd say," the analyst said. "I think the general sentiment on most of the deals is that they went very well. Demand was seen pretty strong on most of the issues."
Market sources feel that the sense of pent-up demand that was seen last week was caused by the disappointingly moderate issuance seen in the first half of 2000.
"I think a lot of people's count was somewhat slow," said one source. "I think issuers are in fact feeling more upbeat; that there is demand there and that the bonds are getting sold and that's a good thing."
But despite all of the supply leaking out of the pipeline last week, spreads remained intact for the most part.
"Spreads overall really have held in quite nicely," said one source. "In the classic days, in the market, spreads usually blew out or there was a lot of pressure on spreads and they widened. In this particular market though, it seems that even with all of the supply, spreads are still holding in quite nicely."
The source attributed the good quality condition of the secondary market to the good demand and good distribution seen last week in correlation with the fact that most asset-backed dealers are pretty mean and lean on their inventory.
"Most (dealers) today carry inventories anywhere from maybe $200 million to $250 million at max on their books," the source said. "We've seen dealers that are fairly lean and mean - meaning that they don't have a huge position."
With all of the activity seen last week, the market is wondering if this is a sign of increased issuance going forward.
"I think this aura or this feeling is going to give us another two or three weeks where we could potentially see some supply coming out of the woodwork," said the analyst. "I think most issuers are sensing that Hey this is a good time' and might want to start striking while it's hot. It's a good economy to bring deals."
Looking ahead, there aren't many deals slated to come to market this week. Onyx Acceptance Corp. is shopping a $440 million auto transaction expected to bear a financial guaranty by MBIA.
Two franchise loan-backed deals are expected to come out of the 144A market. ACLC's $210 million transaction will include franchise loans originated by Amresco Commercial Finance, and Commercial Net Leasing (CNL) is expected to bring a $281 million restaurant lease transaction.