There was phenomenal activity in last week's asset-backed securities market, with more than $6 billion in issuance.
Credit cards accounted for nearly $3.4 billion of the issuance, largely attributable to Citibank's most recent senior-notes-only deal, which was upsized to $2.25 billion from $1.25 billion.
"What does that tell you?" asked Jeff Salmon, head of research at Barclays Capital. "Investor demand is still there, and upsized deals are pricing well."
The spread story was unchanged-to-slightly better on the week, Salmon said.
Most of the pricing and trading was in the primary market. For the third week in a row, the asset-backed market has held strong despite the volatility in the equity and the corporate bond markets.
"The asset-backed market, up to now, has been shielded from the volatility in the other markets," Salmon said.
For example, an analyst at Morgan Stanley Dean Witter cut his ratings on monoline credit card companies, in anticipation of deteriorating U.S. consumer credit quality. While the news hit the stocks of several credit card issuers, as well as the corporate counterparts, the asset-backed credit card deals in the market were apparently unscathed.
"In this case again, I think again the ABS market has really held in nicely," Salmon said. "The proof is checking in with my trader. There's strong bids, people still want the paper. I can't find it. We've sold some blocks of Providian. Again, same story. Very positive dynamics."
Freddie Mac Wrap?
In the Banc of America's daily research report, ABS FirstLook, the analysts noted that the Freddie Mac wrapped portion of Option One Mortgage Corp.'s near $700 million deal priced 5-7 points inside of where market would price a tradition monoline wrapped deal.
Cited from the report: "A Freddie Mac wrap should naturally reduce execution spreads due to the preferential capital treatment for banks that buy the securities. In the recent past, the improvement in spread has been more to the tune of 15 basis points."
BofA concluded there must be minimal bank participation in home-equity loan transactions.
Other transactions from the home equity sector included the $433 million AFC Home Equity deal from issuer Superior Bank FSB. Merrill Lynch brought the two-part transaction, where both floating-rate tranches priced within talk.
Merrill also managed Conseco Finance's $883 million home-equity deal, which also, for the most part, priced in line with guidance. For example, the one-year, $75 million class-A priced at 33 over the EDSF, well within the 35-area talk.
Expect to see Americredit launch its quarterly auto deal in the near term, following its $1 billion filing with the Securities & Exchange Commission.
Also, First Union amended its rent-a-shelf filing, called Pooled Auto Securities Shelf, which the bank could bring to market anytime now, granted the filing is approved.