Despite its current difficulties, Bear Stearns took the top spot in the U.S. RMBS manager rankings for 1Q08, according to Thomson Financial data. The bank rose from a second place finish for all of 2007 and third place in the first quarter of last year.
But volume was hardly impressive for any of the banks topping the league tables this quarter as investors continue to scorn the sector and banks continue their attempt to bandage wounded balance sheets. Total volume for U.S. RMBS managers in 1Q08 fell to $61 billion from $273.9 billion in 2007 with 111 issues down from 351, according to Thomson.
Bear Stearns took a 13.4% market share with $8.2 billion in 12 deals. Issuance was almost one third of 1Q07 when the bank brought in $21.4 billion in 31 deals.
Second place finisher Credit Suisse claimed 12.9% market share in 13 deals, totaling approximately $7.9 billion. While the bank jumped two spots from 1Q07, its total volume fell from $19.1 billion with 29 deals. Banc of America Securities jumped nine notches to take third place from 1Q07, but with only half the amount of volume that it brought in the year prior. This quarter, the bank took 12.8% market share with $7.8 billion in 12 deals, compared to $14.3 billion in issuance in 26 deals for the same period last year.
Rounding out the top five were Lehman Brothers and Barclays Capital which placed fourth and fifth for U.S. RMBS managers, respectively. Lehman took a three notch fall from first place in 1Q07 and a top place finish for 2007 overall. This quarter, the bank issued only nine deals totaling $4.8 billion and a 7.8% market share, a nosedive from 35 deals totaling $28.7 billion one year prior.
Fifth place finisher Barclays may have been the only one who benefited from the drop in competition. The bank issued eight deals totaling $4.7 billion, a leap up from 16th place the year prior and interestingly, with not much of a difference in volume. For 1Q07 the bank brought in $4.8 billion in nine deals.
Indeed, it appears that recent attempts by the Federal Reserve and the Office of Federal Housing Enterprise Oversight (OFHEO) did not come in time to boost MBS issuance in the first quarter. However, the recent outlook has been more optimistic, according to Barclays. The bank's analysts noted that the announcement of the Treasury Secured Lending Facility "has assured investors that liquidity in the mortgage market will be improving in the near term."
At the same time, the Fed's primary credit dealer facility, which provides funding for dealers in exchange for eligible collateral including investment-grade corporate securities, municipal securities, MBS, ABS and collateral eligible for tri-party repurchase agreements, is the most "important step the Fed has taken throughout this entire crisis," UBS analysts said in a recent report.
Also adding to the liquidity boosts is OFHEO's reduction in the surplus capital requirement for the GSEs, which has made the market optimistic that the GSEs will be the new back-stop bid for MBS. The increase in permissible holdings of agency MBS for Federal Home Loan Banks will also add liquidity, though Barclays was not as optimistic that these banks would provide the liquidity in the sum of $100 billion "as headlines suggest," expecting liquidity more in line with $30 billion.
But government attempts to alleviate investor concerns are not a cure, analysts said. Despite some of the Fed easing, counterparty risk issues will now be a permanent focus for the market for months to come, which will be a barrier for new issuance, UBS analysts said. "We believe that the higher aversion to counterparty risk among the dealer community and securities lenders will leave financing as a continuing issue for the market."
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