HSBC and JPMorgan launched and priced its £2.9 billion ($4.48 billion) Silk Road Finance, a U.K. RMBS backed by prime loans originated by the Co-operative Bank.

The Co-operative Bank is the result of a merger between Cooperative Financial Services and Britannia Building Society in August 2009. Silk Road securitizes prime U.K. residential owner occupied mortgages that were offered by the originator under the Britannia brand or were originally stand-alone Britannia originations.

Only the £2.5 billion triple-A rated class A1 note was publicly offered and according to analysts at Unicredit, of that only £375 million was placed out of the initial £500 million targeted.

“The shortfall in the actual placement compared to the originally targeted volume reflects mainly the current threadbare Sterling floater universe for which demand is obviously limited,” analysts said. “Furthermore, some investors seem to not be entirely comfortable with the Co-op exposure embedded in Silk Road’s structure: though rated, the building society is obviously not publicly listed, which seems to have been unfavorable.”

From a credit perspective, the quality of the mortgage portfolio was quite high, but a relatively high level of interest only loans made up part of that. The Class A1 notes priced at 140bp over the three-month Libor . Prior to the launch, price whispers were as low as 130 basis points. Overall, around 15 investors participated, analysts said.

“Going forward, we expect at least some steady deal flow on the primary market and not a complete standstill in public placements as seen in the last two years,” Unicredit analysts said. “The actually publicly placed volume in the first quarter very much depends on central bank policies with respect to repo lending activity, regulations, as well as on the ABS market spread levels in comparison to the overall credit market spreads.”

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