The U.S. primary ABS market had another bustling week to once again price upwards of $9.3 billion as of Thursday's market close, with the home equity sector accounting for $5.5 billion of new-issue volume. With the heavy new issue calendar dominating the landscape, there were conflicting reports on secondary volume. "Wednesday was a very active day in the secondary market, led by profit takers in all asset classes. For the first time in the past couple of weeks, the selling was met with widespread customer interest, while primary spreads continued to grind in tighter across ABS sectors," said Credit Suisse First Boston analysts in a report.
However, this was not the broad consensus. "All hands on deck are focused on new issue - traders, salesmen, and accounts. There is very little activity in secondary from my vantage point," said one managing director on a home-equity trading desk.
Encore Mortgage was in the market with a $1.6 billion offering via Countrywide Securities (see related story p. 12). The one-year triple-A rated class priced outside of expectations at nine basis points over one-month Libor versus guidance set at eight basis points over Libor. The 4.67-year mezzanine class also priced wide at 44 basis points over one-month Libor versus guidance in the 42 basis point area over one-month Libor. The 4.1-year triple-B rated M8 class priced at 140 basis points over Libor relative to talk in the 135 basis point area over Libor.
Bear Stearns priced $661.7 million in home-equity ABS off of its BSABS dealer shelf. The three-year triple-A notes priced at nineteen basis points over one-month Libor. Down in credit, the triple-B minus tranche, with a 4.18-year average life, cleared 190 basis points over Libor.
Morgan Stanley also tapped the market for $1.54 billion off of its dealer shelf. Spreads came in tight to guidance on the mezzanine classes, with the 4.92-year double-A minus notes clearing at 48 basis points over one-month Libor, relative to expectations in the 50 basis point area over Libor. The 4.9-year single-A plus rated notes priced at 63 basis points over one-month Libor versus talk in the 65 to 67 basis point range over Libor area.
USAA Federal Savings Bank came with a $1.06 billion offering backed by prime auto loans via Bank of America Securities and Citigroup Global Markets. Spreads remained tight for auto paper held firm, with the 2.10-year senior notes coming in three basis points under EDSF. All four offered classes priced at sub-benchmark levels.
CNH Global was in the market with its first deal of 2005 - a $1.38 billion offering led by ABN AMRO and JPMorgan Securities backed by agricultural and construction equipment leases. The 3.36-year floaters cleared at four points over one-month Libor, versus guidance in the five basis point area over Libor. The fixed-rate senior notes of the same duration hit at eight points over swaps versus guidance in the eight to nine basis point over swaps range.
Drug Royalty Corp. priced the $42.6 million tranche of its $68.5 million Drug Royalty Trust 2005-1 offering. Wachovia Securities led the rare pharmaceutical patent royalty-backed transaction (see ASR, 2/28/05). The single-A rated, 2.8-year, senior notes cleared at 150 basis points over three-month Libor. The deal - the first senior/subordinate offering of its kind - has been in the works for close to a year, market sources said.
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