CDOs

A number of market players are counting on newly issued subprime mortgages to perform better than those originated six months or even three months ago, as marginal issuers are weeded out along with the type of borrowers that they sought.

The U.S. House of Representatives' approval of tighter restrictions on the preferred lender relationships between student loan providers and universities is not expected to adversely affect the securitization industry. However, market professionals are already awaiting further Congressional actions that could significantly impact the SLABS sector.

The gush of issuance from the subprime MBS sector has slowed significantly since the overall ABS market kicked off in January and it is beginning to drag down overall issuance numbers, too. No doubt, this is sobering news for the ABS industry.

U.S. rating agencies are coming under scrutiny in the public eye, as the severity of negative subprime mortgage performance - and its ultimate impact on structured finance CDOs - has renewed the attention paid to credit ratings. Some on Wall Street are privately chuckling at the triple-A ratings assigned to certain deals in recent months, and expect that it's only a matter of time before regulators turn more attention to the agencies.

Calyon New York plans to roll out its first credit arbitrage ABCP program this week, a conduit designed to support its growing asset- and mortgage-backed securities endeavors, specifically its non-multiseller ABS CDO business.

Bradford & Bingley announced that it will acquire a GBP2 billion ($3.9 billion) share of Kensington Group's prime mortgage portfolio over the next two years. The acquisitions will be made on a monthly basis, and each portfolio will comprise a blend of prime buy-to-let, self-certified and standard loans, in line with strict credit parameters, B&B spokesperson Nickie Aiken said.

Standard & Poor's announced last week it will begin requiring more credit enhancement for closed-end subprime second-lien mortgages. The rating agency joins Moody's Investors Service in its decision to do so.

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JPMorgan Securities 7,539.2 1 33.3 9 Wachovia Securities 6,656.4 2 29.4 6 Banc of America Securities 5,350.7 3 23.6 4 ABN AMRO 5,149.8 4 22.8 4 Barclays Capital 4,837.2 5 21.4 4 Deutsche Bank Securities 3,706.9 6 16.4 3 Credit Suisse 3,631.1 7 16.0 3 RBS Greenwich Capital 3,561.5 8 15.7 3 HSBC Securities 2,058.0 9 9.1 2 Morgan Stanley 1,870.3 10 8.3 2 Industry Total 22,627.6 - 100.0 24 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Merrill Lynch 26,501.4 1 20.4 30 Citigroup Global Markets 14,489.4 2 11.2 23 JPMorgan Securities 10,756.0 3 8.3 19 Wachovia Securities 9,636.8 4 7.4 17 Morgan Stanley 9,493.8 5 7.3 38 UBS 8,134.0 6 6.3 14 Barclays Capital 8,133.7 7 6.3 10 Banc of America Securities 6,666.7 8 5.1 7 Deutsche Bank 6,546.6 9 5.0 15 Bear Stearns 5,844.4 10 4.5 10 Industry Total 129,942.2 - 100.0 228 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JPMorgan Securities 10,205.0 1 28.3 16 Banc of America Securities 9,415.0 2 26.1 16 Morgan Stanley 5,252.6 3 14.5 6 Citigroup Global Markets 5,000.0 4 13.8 7 Credit Suisse 2,842.6 5 7.9 4 Deutsche Bank Securities 2,575.0 6 7.1 8 Barclays Capital 2,350.0 7 6.5 4 ABN AMRO 2,242.6 8 6.2 2 RBS Greenwich Capital 2,075.0 9 5.7 6 Wachovia Securities 1,275.0 10 3.5 3 Industry Total 36,115.3 - 100.0 55 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Countrywide Securities 19,406.5 1 13.8 19 RBS Greenwich Capital 18,187.7 2 13.0 22 Merrill Lynch 16,146.9 3 11.5 16 Morgan Stanley 13,137.2 4 9.4 14 Lehman Brothers 12,783.9 5 9.1 15 Banc of America Securities 12,305.9 6 8.8 17 Bear Stearns 11,379.1 7 8.1 19 Citigroup Global Markets 11,289.2 8 8.0 13 JPMorgan Securities 8,011.0 9 5.7 9 Deutsche Bank Securities 7,987.8 10 5.7 10 Industry Total 140,300.1 - 100.0 174 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JPMorgan Securities 11,994.9 1 46.2 4 Banc of America Securities 11,558.4 2 44.6 4 Barclays Capital 8,836.0 3 34.1 2 Credit Suisse 8,707.8 4 33.6 3 Deutsche Bank Securities 7,729.2 4 29.8 3 Morgan Stanley 6,270.3 6 24.2 2 Goldman Sachs 5,842.0 7 22.5 2 Wachovia Securities 4,806.0 8 18.5 1 Lehman Brothers 4,142.0 9 16.0 1 RBS Greenwich Capital 3,051.4 10 11.8 1 Industry Total 25,942.6 - 100.0 10 Source: Thomson Financial

auto ABS 8% credit card ABS 12% equipment ABS 1% real estate ABS 69% student loan ABS 9% trade receivables 0% utilities ABS 0%

MIAMI - While federal regulators and, possibly, the rating agencies are advocating for loan modifications in lieu of foreclosures, some say loan modifications will only delay inevitable defaults.

The insurance-linked security industry appears to be evolving on two distinctly different fronts. On one hand, the 2004 and 2005 weather seasons tested the insurance and reinsurance industries' combined abilities to manage risks related to weather-induced catastrophes. These days, a much more benign period is testing its ability to find new business. Elsewhere, life and excess mortality risks are increasingly pushing the envelope for innovation in the industry.

The cacophony surrounding the subprime market's recent volatility is beginning to quiet down.

Saying that ABN AMRO must put the estimated $21 billion sale of its LaSalle Bank unit to a shareholder vote before it agrees to a takeover by Barclays Bank, a Dutch court put the brakes on the transaction and created an opportunity for rival bidders led by Royal Bank of Scotland to take over the company.

MIAMI - Shaken by diminished investor demand and in some cases significant losses, but heartened by improving market conditions, CDO issuers are cautiously slipping quarters back into the so-called CDO machine that once fueled much of the subprime mortgage sector's most recent rise.

One could argue that investor sentiment toward subprime mortgages has become more optimistic in recent weeks. HEL spreads have tightened in the secondary and synthetic markets - and some new-issue deals have actually been over-subscribed.

The Loan Only Credit Default Swaps (LCDS) market has been an increasingly hot topic, especially as the market gears up for the launch of the LCDS Index - expected at the end of the month - marking the product's U.S. expansion.