The Spanish treasury held its second auction for MBS structured deals on Dec 11.

The Treasury granted €7.2 billion ($9.8 billion), making a total of €10 billion of new funding in 2008. The transaction consisted of outright buying of structured bonds with a fixed coupon of 4.4% and a three-year bullet maturity, backed by mortgages originated after October 2008. As a result, only Cedula tranches and multi-seller structured Cedulas were eligible. 

The Spanish government said that the program will total €50 billion thus its likely that €40 billion of new auctions will be conducted in 2009 but analysts at Societe Generale said that the implies that there will be roughly government could increase the total amount if necessary.

"What is critical here is the extent to which governments are able to raise new funding," said Societe Generale analysts. "The markets could deteriorate much further if governments themselves have difficulty finding new money."

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