In what some ABS market professionals described as a relatively light week, the ABS primary market turned out about $12.5 billion in new issuance. The credit card sector took a break from robust activity so far this year, and investors' reactions to lower retail sales and inflation data rattled Treasury yields throughout the week.

The market's largest deal was a GBP4.5 billion ($7.8 billion) residential mortgage-backed securitization deal, called Permanent Financing UK, which was increased from

$7.2 billion. Issued by the Halifax PLC, Permanent Financing sold bonds to investors in multiple currencies through Bank of America and JPMorgan. Credit Suisse acted as co-lead, executing the sales in the U.S. Investors apparently greeted the deal warmly, with spreads tightening across the board in initial orders.

No credit card deals priced by press time, but the asset class made its presence felt. Charge-offs fell sharply in Standard & Poor's latest assessment of remittance rates. As measured by S&P's CCQI, charge-offs dropped 380 basis points to 3.2% - a level not since the early 1990s, according to the rating agency. The absence of credit card ABS did not worry market professionals because issuance from the asset class so far this year has reached nearly $15 billion. Also, deal flow is expected to be healthy, especially in the first half of the year, when a healthy number of credit card-backed deals are slated to come up for refinancing, said market sources. There was also talk of a $300 million deal from Providian in the market.

U.S. Treasuries made advances on Tuesday, only to give them back on Wednesday, when yields on 10-year notes inched up three basis points. By late Thursday, however, the bond markets handled economic news fairly well. Combined with weaker housing starts and a Consumer Price Index that increased just 0.1%, Treasury yields moved down nine basis points, to 4.64%.

Secondary trading on the ABS market was also fairly quiet. Spread technicals remained positive as the market awaited new issue supply volume, according to Credit Suisse.

Among home equity loans, Ameriquest Mortgage priced a $1.4 billion deal via UBS. The one-year tranche on that deal priced seven basis points over one-month Libor, with plenty of spread pickup in the subordinate tranches, which came in between 115 basis points and 230 basis points over the benchmark. Morgan Stanley ushered a $2.2 billion deal to investors, with Credit Suisse as co-manager. GMAC-RFC priced a $214 million deal through Bear Stearns. The two-year senior tranche came in at 25 basis points over swaps, while several five-year subordinate classes priced between 195 basis points and 300 basis points over swaps. The bank also priced a $109 million deal backed by a package of its loans, through the EMC Mortgage Loan Trust.

In the equipment sector, CIT Group priced a $1 billion equipment deal through Merrill Lynch. The most senior tranche, with the one-year tranche pricing at one basis point over Libor, and its most subordinate one-year slice, priced 37 points wide of certain Eurodollar futures contracts.

Hann Financial Service priced a 144a $312 million auto lease deal through JPMorgan. The two-year class priced at 12 basis points over swaps. Meanwhile, GE Commercial Loan Trust issued an $812 million deal, via Citigroup Global Markets, with pricing coming in at the very tight end of guidance, according to Bank of America. The senior two-year tranche came in at eight basis points above the three-month Libor, while the most subordinate piece was at 130 basis points over the same benchmark.

There was plenty of talk of new deals in the pipeline at press time. Among home equity loans, Ameriquest was expected to price another deal, this time raising $280 million, Countrywide was readying a $1.7 billion transaction, JPMorgan had a $1.1 billion deal yet to price; Morgan Stanley launched $3.1 billion in two separate home equity loan deal; RBS was in the market with a $775 million deal; and The Winter Group has a $150 million deal yet to price. Equity One, a consumer finance company, had a $321 million Popular ABS Mortgage Pass-Through deal on the table backed by home equity loans; Lehman Brothers was preparing an $850 million deal through its Structured Asset Securities Corp.; and Opteum Mortgage was circulating a $927 million offering.

Both Deutsche Bank and Bear Stearns were in the market with scratch and dent transactions, at $171 million and $746 million, respectively. GE Commercial Loan Trust was in the market with an $812 million mixed collateral deal.

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

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