The December rush has finally started to place its traditional stamp on spreads as some deals began to see softening on trading, particularly at the triple-A level. However, when looking down the ratings tier, investors will still find a similar story of tightening spreads.

According to Citigroup analysts, triple-A spreads are slightly softer in the secondary market, particularly for triple-A rated RMBS. Primary market pricing has been wider in many cases, with some deals offering a significant premium.

Overall, secondary triple-A CMBS spreads are around three basis points inside January levels, RMBS is 0.5 basis points to 1.5 basis point wider while credit cards and autos are around one to four basis points wider. Below triple-A, analysts said everything is tighter, excepting credit card transactions.

By press time, the market had already priced 23 billion ($30.5 billion) worth in deals, although the visible European pipeline has refilled to a staggering 44 billion. All credit markets have seen substantial growth this year. Over 70% of new issuance has been backed by real estate to date, either residential or commercial. Prime RMBS is up 70% year-over-year, subprime 53%, and CMBS 25%.

New deals in the pike

New in the pipeline was the recently announced second RMBS transaction for Caja Madrid, the 1.8 billion Madrid RMBS II FTA. It follows the issuer's deal completed last month. The pool comprises 100% prime, owner occupied first-lien Spanish mortgages with a pool current LTV of 93% and 20-month seasoning. The Royal Bank of Scotland, Barclays Capital and Calyon Securities are co-leads on the deal.

On the CMBS front, a new 560 million German CMBS from Eurohypo's Opera conduit, Opera Germany No. 2, was announced. The deal is backed by four shopping centers in North-Rhine Westphalia. Commerzbank and UBS are co-managing the deal. Dealers also began marketing the French CMBS from Natixis' new commercial loan vehicle, FCC Nacrea. The 328.05 million CMBS is backed by 13 French loans secured on 16 high-grade properties.

Meanwhile, on the U.K. CMBS side, bookrunners announced the 11th deal from Deutsche Bank's Deco CMBS vehicle, the GBP444.4 million ($874.8 million) Deco 11. The portfolio comprises 17 loans on 56 properties to 1,911 tenants with an average LTV of 76%. The main types of properties in the pool are office, retail, industrial warehouse and student housing.

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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