U.K. RMBS issuance continues to price tightly in heavy demand, setting historical lows for the sector benchmark yields, say industry sources. Spreads are expected to continue tightening, according to JPMorgan Securities, fueled by strong investor demand and the relative value of securitization compared to credit alternatives.

Dutch activity began to pick up with a second RMBS issue marketing last week from ASR Bank's 1.163 million (US$1.44 million). The Delphinus 2004 deal saw its four tranches tighten on the back of strong demand for RMBS paper. The triple-A piece tightened by 1.5 to 2 basis points and priced at 21 basis points over the three-month Euribor. The last transaction in the program, Delphinus 2003-2, priced its class A at 24 basis points over Euribor during the second half of last year. "Continuing the recent theme, trading on the break was two basis points tighter at 100.09, a discount margin of Euribor plus 19, suggesting further tightening may ensue into February," said analysts at Royal Bank of Scotland.

Citigroup Global Markets and ABN AMRO began marketing a 1 billion (US$1.23 billion) RMBS deal for Delta Lloyd, dubbed Arena 2004-1 BV. A total of 699 million (US$865 million) of triple-A floating-rate notes will be offered with a four-year average life, plus 250 million (US$309 million) fixed-rate triple-A notes dated at eight years. The junior classes include a 37 million (US$45.8 million) single-A plus rated tranche, a 5 million (US$6.19 million) triple-B plus D class and a 14 million (US$17.3 million) triple-B class.

Last May, Arena 2003-1 BV priced a 4.4-year floating rate class at 24 basis points and an eight-year fixed-rate bond to yield 33 basis points over swaps. Sources expect this latest deal to be oversubscribed at the triple-A level and in line with recent market pricing.

Kensington Group Plc began marketing its GBP650 million (US$1.17 billion) RMS17 offering through Barclays Capital and WestLB. The deal will include tranches denominated in U.S. dollars, euros and sterling pounds. According to market reports, the issuer's last deal priced its short-term A1 notes at two basis points over Libor.

Spain is also contributing to the growing RMBS repertoire this year. Bankiter is expected to come to market with a 500 million (US$619 million) RMBS deal, Bankiter 8. A 600 million (US$743 million) RMBS deal for Cajamar and Caixa Tarragona is also expected to emerge in the coming days. TDA 10 Mixto follows a November transaction launched by Cajamar in conjunction with another Spanish bank.

And from Germany, a new transaction under the Provide platform has been announced. The 3.5 billion (US$4.3 billion) Provide-A 2004-1 is being launched via Lehman Brothers and the originating bank, HypoVereinsbank. The deal is backed by a granular portfolio with a 58.4% LTV and an average 78 months seasoning. This will mark the 19th deal launched under the popular platform and brings volume totals to more than 31 billion (US$38.3 billion). The German market has experienced a 60% drop in risk transfer transactions last year, Standard & Poor's noted in a recent report.

Outside of RMBS, a new auto deal is in the pipeline. The Peugeot Group is launching its third transaction under the Auto ABS Compartment series. The 1 billion (US$1.23 billion) floating-rate, Auto ABS Compartment 2004-1 will include two tranches at the triple-A and single-A level. Pricing is expected during the middle of this month.

In Italian government receivables, SCIP 3 continues to inch closer to its marketing phase. According to market sources, the Italian treasury is expected to announce official lead mandates for the 2 billion (US$2.4 billion) offering. "Bid/offer spreads for SCIP-2 have traded wider on news of slower-than-expected payments; its class A1 notes - originally expected to repay this April - are trading at a discount margin of 16/14 basis points (bid/offer) over Euribor, while the A2s due next April, are trading at 18/3 basis points (bid/offer)," reported market sources.

Infrastructure SpA, the Italian securitization to fund a high-speed rail link, saw its three-tranche offering price last week. At press time, the deal had been upsized to 5 million (US$6.19 billion) from the original 4 billion (US$4.9 billion). About 3 billion (US$3.7 billion) of those notes will be offered with a 20-year fixed-rate tenor. The 10-year notes are being talked at 14 to 16 basis points over swaps, five points inside initial guidance; the 15-year notes are talked at 18 basis points and the 20-year notes are talked at 25 basis points over swaps, respectively.

The transaction refinances existing bank facilities that finance part of an estimated 30 billion (US$37 billion) total construction cost. "All tranches are expected to receive a 0% risk weighting in qualifying jurisdictions, making the notes more attractive to bank investors," explained one market source. "The notes are repaid from track access charges, the Italian government covering any shortfall."

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