While "Where is relative value?" may be a relative question, researchers and traders speaking at this fall's conferences did offer some nuggets of insight during panel discussions. "Researchers are always confused by the question of relative value," said Banc One Capital Markets research head Alex Roever. "The type of investor you are - securities lender, insurance company or CDO - will decide your relative value assessments."
Roever, for example, likes 2.5-year, wrapped, non-prime auto loan ABS from AmeriCredit, which he labeled "a good buy" in the 60 basis points over swaps area. Salomon Smith Barney strategist Mary Kane said she liked credit card ABS, which on an OAS basis looks more attractive than home-equity paper. Two-year, triple-A prime auto paper is currently the most expensive versus other aspects of ABS, but has great value as a defensive play, she added.
Players speaking at the traders roundtable all liked student loan ABS - particularly Treasury-based supply - due to the tightness of the TED spread, which should not widen in the near term. Traders all liked the home equity sector, with most favoring short-dated, triple-A floaters.
Credit Suisse First Boston's Greg Richter favored A3 and A4 tranches of Conseco home equity paper, which he said was trading outside of triple-A ranges. Richter also liked Australian MBS, NIM supply and tier-one credit card ABS as a liquidity play.
For those with nerves of steel and ice in their veins, United Capital Markets CEO and founder John Devaney said there are always opportunities in nervous, illiquid markets, if one is willing to do the credit and workout research. As CSFB's Richter said, "At the right price, every sector has value."