The U.S. ABS primary market started the New Year with a sluggish pace, pricing only $7 billion of new issues.

The light week was most likely due to the newly implemented Securities and Exchange Commission Regulation AB, which became fully effective Jan. 1. Sources believe issuers are holding back from placing deals as they work to comply with the new rule. The issuance drought follows a number of weeks late last year when volumes routinely reached into the high $20 billions range. Deal flow is not expected to resume its normal pace until later in the quarter.

The largest deal last week was a $2 billion home equity transaction from Lehman Brothers. The deal was being talked in the nine basis points over one-month Libor area for the one-year tranche and at 24 basis points over one-month Libor for the three-year tranche. The 5.8-year tranche was being talked at 34 basis points over one-month Libor.

The double-A-plus-rated, five-year tranche was being talked at 44 basis points over one-month Libor, while the double-A 4.5-year tranche was being talked at 46 basis points over one-month Libor. The double-A-minus, 4.4-year tranche was being talked at 48 basis points over one-month Libor and the single-A-plus tranche was being talked at 63 basis points over one month Libor. The deal had yet to price as of press time.

Meanwhile, C-BASS had an $828 million home equity deal in the market. Barclays Capital was the sole lead book runner on the deal. The $189 million one-year tranche was being talked in the high 20 basis points over EDSF range. The $119 million two-year tranche was being talked in the mid-30 basis points over swaps range, while the four-year tranche was being talked in the 80 basis points over swaps area.

On the home equity front, Morgan Stanley was in the market with a $729 million deal. The $324 million, triple-A-rated one-year tranche of the transaction was talked at eight basis points over one-month Libor, while the $104 million, three-year tranche of the deal was talked in the 21 to 22 basis points over one-month Libor range. The sub-$100 million 6.5-year tranche of the deal was talked in the 32 to 33 basis points over one-month Libor range.

Goldman Sachs had a scratch and dent mortgage ABS deal in the market, sized at $141 million. The 1.74-year tranche of the deal was being talked in the 35 basis points over one-month Libor area. The 5.5-year, double-A tranche of the deal was being talked in the 57 basis points over one-month Libor area, while the five-year, single-A tranche was being talked in the 90 basis points over one-month Libor area.

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

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