Despite being the largest quarter of new issue ABS volume, the U.S. ABS market saw declines in supply in two of the three main asset classes of the market. The 30% volume increase over the year ago period was driven by the 62.1% increase in mortgage ABS, although the student loan sector also grew by 18.4%. The first quarter represented the second consecutive 30% increase in volume.
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Total ABS volume in 1Q04 totaled $167.5 billion, versus the $128 billion seen in 1Q03, according to Thomson Financial, making 1Q04 the largest volume quarter in the market's history. Mortgage ABS supply topped $120 billion, also a record for the sector.
Based solely on 1Q04 numbers, the U.S. ABS market is on pace to raise the bar again, although many anticipate a slowdown in primary ABS activity. In the unlikely scenario that the 1Q04 pace is maintained throughout 2004, the market will price $670 billion in supply.
The boom in mortgage ABS supply this quarter was expected, however, as the market steadily digested the loans originated throughout last year's record refinance wave. More surprising to some was the increase in student loan supply, which also benefited from record refinancing of outstanding loans into consolidation loan collateral.
While mortgage and student loan supply increased, two major sectors of the market saw issuance decline. With $17.9 billion sold in 1Q04, auto loan ABS was off 2.9% from the $18.4 billion in 1Q03. Just two of the Big Three captive lenders tapped the primary market in 1Q04, with Ford Motor Credit taking the quarter off. Ford collateral did enter the market, however, partially backing the Goldman Sachs Auto Loan Trust 2004-1transaction.
Despite three of the largest transactions the sector has seen to date, credit card ABS supply declined 39.8%, to $12.9 billion from $21.5 billion 1Q03. The leading bank issuer in the quarter was Bank One, which priced $2.8 billion total from its BOIT shelf. Chase Manhattan Bank and Citibank N.A. each completed one transaction, although Citibank reopened its initial $1.5 billion 2004-A1 offering for an additional $1.25 billion.
While the lion's share of the student loan ABS volume comes from sector benchmark issuer Sallie Mae securitizing $8.2 billion via four transactions in 1Q04 — also saw separate billion-dollar deals from Arizona Educational Loan Marketing Corp. and NorthStar Education Finance. NorthStar's 2004-1 deal was its first term securitization.
Also of note, the beleaguered manufactured housing sector priced two transactions in the quarter, one of which was a novel repackaging. Credit Suisse First Boston repackaged outstanding Oakwood Homes MH ABS and issued a $252 million transaction from its ABSMH shelf. The only traditional MH securitization, a $200 million 2004-A deal from Origen Financial, priced in January.