As most of the industry was either in Phoenix or en route, the asset-backed market showed barely a pulse last week, with just slight action, all of it in secondary trading.
"There's always somebody out there, trying to pick off a desk or something," said one trader. "There's always something going on."
Said another trader, "Actually the main thing that did trade on the list traded at more aggressive levels than we bid, so I'd say that spreads have held in. But as it is, I'd say it's going to slow down, as more people head out to Phoenix."
The back-to-back conferences began last Wednesday with Asset Securitization 2000, hosted by Frank J. Fabozzi, Inc., and will continue over the next few days with the Asset Securitization 2000 Symposuim, hosted by the Strategic Research Institute.
Of relevance, asset-backed analysts believe that the effect of last week's Treasury buy-back announcement and Treasury volatility has been that trading activity for both ABS and CMBS ended up being quite muted in recent days as investors chose to wait out the frantic developments in the Treasury market. According to a report put out by Deutsche Bank Alex. Brown, between the volatility and the inversion of the Treasury curve, spreads to Treasuries have widened significantly.
Over the past two week, CMBS 10-year triple-A tier 2 spreads jumped from 109 basis points to 132 basis points, while fixed-rate spreads in the ABS market gapped out from six to as much as 31 basis points depending on product and maturity.
"With the latest burst of volatility, we are again seeing a steeper credit curve (in addition to wider spreads) across the swaps, CMBS and ABS markets," said Nichol Bakalar, an analyst at Deutsche Bank. "Many dealers hedge ABS inventories with swaps during volatile periods, and with light trading activity, they tend to mark their positions in line with changes in swaps unless there is reason to believe their postions have out- or under-performed swaps," she said.
The Pipeline
Though only a few deals priced last week, some market players think there might be decent trading this week, with a few new issuances, especially from the home-equity sector.
Countrywide priced their $600.1 million home-equity transaction, which was at the wide end of price talk. In the auto sector, Union Acceptance Corp. priced a $282.7 million auto transaction. The transaction was structured as a multi-tranche sequential pay with an MBIA wrap secured by fixed-rate new and used automobile, vans and light truck contracts.
Countrywide announced price guidance for their upcoming $700 million home-equity deal. The transaction consists of both fixed and floating-rate bonds in a senior/mezz/subordinate structure.
In the collateralized loan/debt/bond obligation sectors, Columbus Loan Funding Ltd. Has announced a $359 million CLO. The deal is structured as a non-call three-year and has five classes with average lives ranging between seven and 11 years. Harch Capital Management is lining up a $375 million CDO backed by high-yield debt (30%) and loans (70%).
Saxon Mortgage is set to come with a $475 million, subprime home-equity deal. The pending deal will be backed by a 60/40 mix of fixed- and floating-rate loans. Prudential Securities will act as lead manager and the transaction will have a senior/subordinate structure.
Option One Mortgage is rumored to be in the pipeline as well, sources said. - AT/MG
