It was no tricks - just treats - as the fifth transaction of the Holmes financing series priced last week and clinched the "busiest month ever" title for October European ABS volumes, which reached over EURO19 billion.

Publicly placed transactions reached the EURO20 billion mark with 27 deals that put year issuance at EURO95 billion. And it's no surprise that Holmes, an RMBS transaction, swelled to such an extent, since the flavor of choice for post-Sept. 11 investors has been similiar safe-haven issues.

Abbey National Plc's Holmes saw its fixed-rate triple-A tranche climb to EURO600 million from EURO500 million, a single sterling denominated triple A rated tranche was met with the same enthusiasm, increasing in size by GBP100 million to GBP500 million.

The deal was co-managed by Credit Suisse First Boston, Schroder Salomon Smith Barney and Lehman Brothers.

The fixed-rate tranche of triple-A notes priced at +21 basis points. According to Dresdner Kleinwort Wasserstein, the relatively tight pricing reflects a particular demand for notes that "diversify European fixed-rate portfolios away from credit cards and Dutch RMBS." The double-A notes priced at +35 basis points and the triple-B notes priced at +130 basis points.

Also on the RMBS front last month was Swedish state mortgage bank SBAB, pricing its SRM Investment No.2 Ltd. led by Merrill Lynch. The triple-A-rated, E500 million class A1 notes priced at +44 basis points and a second tranche of EURO410 million, triple-Arated notes priced at +48 basis points. A single-A-rated tranche of EURO30 million priced at +120 basis points and a EURO7.5 million, triple-B-rated tranche priced at +260 basis points.

Bipelle Ducato priced its consumer loan financing co-managed by JP Morgan and Caboto. The EURO498 million transaction was issued in three tranches of floating-rate unsecured notes over an unrated equity piece. The triple-A tranche priced at +42 basis points, 17 basis points wider than the comparable deal Golden Bar 2.

The deal priced at the levels of a non-performing loan perhaps reflecting the fact that the servicer receives "approximately half of the collections on the underlying loans by post as opposed to direct debit," which expose payments to the Italian postal system. It may be also a reflection of the overabundance of Italian paper in the market during the past weeks. "Investors appear to be saturated and looking to diversify," said the analyst at Dresdner.

Also last week, Banca Lombarda e Piedmontese SpA priced its EURO219 million static CDO within the closing October window. Cidneo Finance was managed by BNP Paribas, and the deal falls in line with the dominating structures for post-Sept. 11 CDO issuance, said one market analyst. "Semi-synthetic issuance is driven by diversification," he said. "Going forward we will most likely see more credit default swaps being done and more synthetic arbitrage transactions, because it's a blend in what we see in managed collateralized bond obligations (CBOs) where the sponsor takes an active role." Cidneo is the first semi-synthetic structure since September 11.

The triple-A notes priced 10 basis point wider than pricing prior to September 11 at +59 basis points and the triple-B tranche priced 50 basis points wider at +250 basis points. Dresdner reports: "The credit curve for CDOs, particularly those with static pools, has steepened, and the AAA notes of Anthea and Cidneo priced at the widest levels ever seen while lower-rated tranches came even wider.

"In our view this represents a long-overdue alignment of the returns with the risks of static CDOs. The recent downgrades of European CDO tranches are unlikely to help spreads, although in general we think the ratings of European CDOs should be fairly stable in the short term."

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