CDOs

The Bank of New York expects to take its share of the corporate trust market to number one by acquiring JPMorgan Chase's corporate trust business, in a combination projected to total $8 trillion of debt issues. And, according to Karen Peetz, executive vice president and head of corporate trust at BNY, the purchase will sharply boost BNY's client base, particularly within the CDO sector, where the bank will press towards a near-term goal of 60% market share.

As increasing demand ground CLO spreads tighter and tighter in 2005 - so much so that a number of deals were at risk of breaching spread requirements - more managers looked to middle market loan collateral as a higher yielding alternative.

Spring break and observances of major religious holidays suppressed the primary ABS market for the second consecutive week, resulting in a mere $5.7 billion in issuance by Wednesday afternoon. That fell short of trader estimates, which put issuance between $8 billion and $10 billion.

The top 10 most widely referenced entities within the burgeoning U.S. credit default swap market accounted for 43% of all trades last year, excluding the indices. This is compared with only 27% in 2004, according to Fitch Ratings.

Recent legislative changes to government student loan programs might open doors for more borrowers, but they could also increase the likelihood of borrower defaults, said Fitch Ratings last week.

In a very busy week, bond insurer XL Capital created a holding company to oversee its financial guaranty insurance and reinsurance businesses, and launched an initial public offering to fund its growth.

Look for the U.S. structured finance team at Deutsche Asset Man-agement - a large investor in the ABS market - to grow its portfolio even more over the coming year.

Year to date as of 04/12 Term (days) 04/06 04/07 04/10 04/11 04/12 1-week

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Citigroup 5,077.2 1 26.7 11 JP Morgan 3,956.1 2 20.8 10 Deutsche Bank AG 2,020.4 3 10.6 7 Barclays Capital 1,725.5 4 9.1 4 Royal Bank of Scotland Group 1,606.8 5 8.5 3 Merrill Lynch & Co Inc 1,250.0 6 6.6 3 Credit Suisse 950.0 7 5.0 2 Wachovia Corp 939.0 8 4.9 3 Bear Stearns & Co Inc 824.9 9 4.3 1 Goldman Sachs & Co 411.2 10 2.2 1 Industry Total 19,024.6 - 100.0 25 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 & Co Inc 8,676.4 1 17.8 11 Citigroup 6,807.5 2 13.9 14 UBS 4,764.0 3 9.8 11 Banc of America Securities LLC 4,403.4 4 9.0 13 Deutsche Bank AG 4,304.0 5 8.8 7 Credit Suisse 3,621.4 6 7.4 5 Bear Stearns & Co Inc 3,551.6 7 7.3 8 Goldman Sachs & Co 2,280.9 8 4.7 4 Morgan Stanley 2,107.5 9 4.3 11 Wachovia Corp 1,857.3 10 3.8 6 Industry Total 48,866.1 - 100.0 110 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 JP Morgan 5,974.7 1 29.8 11 Citigroup 4,447.1 2 22.2 7 Banc of America Securities LLC 3,723.3 3 18.6 6 Deutsche Bank AG 2,300.0 4 11.5 6 Morgan Stanley 1,829.0 5 9.1 2 Credit Suisse 625.0 6 3.1 2 Barclays Capital 500.0 7 2.5 1 Lehman Brothers 250.0 8 1.3 1 Wachovia Corp 249.9 9 1.2 1 Royal Bank of Scotland Group 175.0 10 0.9 1 Industry Total 20,074.0 - 100.0 30 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 Credit Suisse 16,570.0 1 11.0 32 Lehman Brothers 15,130.9 2 10.0 34 Countrywide Securities Corp 15,001.3 3 9.9 17 Morgan Stanley 13,244.8 4 8.8 17 Deutsche Bank AG 11,006.7 5 7.3 19 Bear Stearns & Co Inc 10,364.3 6 6.9 30 Merrill Lynch & Co Inc 10,045.8 7 6.6 13 JP Morgan 9,863.4 8 6.5 15 Royal Bank of Scotland Group 9,348.1 9 6.2 12 Citigroup 8,276.2 10 5.5 23 Industry Total 151,304.3 - 100.0 251 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 Citigroup 2,915.8 1 18.0 4 Deutsche Bank AG 2,801.0 2 17.3 3 Merrill Lynch & Co Inc 2,301.0 3 14.2 2 Banc of America Securities LLC 2,027.7 4 12.5 3 Credit Suisse 1,698.4 5 10.5 3 Lehman Brothers 1,284.7 6 7.9 1 Goldman Sachs & Co 1,255.5 7 7.7 1 UBS 450.4 8 2.8 1 SunTrust Banks 382.5 9 2.4 1 Industry Total 16,222.9 - 100.0 11 Source: Thomson Financial

auto ABS 8% credit card ABS 9% enterprise finance 0% equipment ABS 2% real estate ABS 74% structured settlements 0% student loan ABS 7% trade receivables 0%

Citigroup Global Markets grabbed the top slot on the lead managers league table for the first quarter, surging ahead from its ninth place finish in the same period last year, according to data from Thomson Financial. The investment bank underwrote $29 billion in domestic ABS deals through March 31, which was $5 billion more over second-place finisher Credit Suisse, and enough activity to open a comfortable lead ahead of its competitors.

The CLO/CDO and derivatives market has been heating up for well over a year now, with CDO issuance alone hitting $40 billion year to date, nearly half of total volume in 2005, according to Lehman Brothers. While this is exciting news, several market sources warn that too many risk managers lack the know-how to anticipate shaky deal structures and they warn that it might take a credit meltdown to get banks to polish their risk teams.

Dealers are working amongst themselves and with customers to decide if and when the home equity ABS synthetic index should incorporate more than the 20 deals it currently references. Those interested in either creating a new index product or increasing the number of subprime deals included in each series of the ABX.HE index - perhaps to as many as 50 or 100 - say it is necessary to promote correlation trading. But some worry that changing the index too soon after it began trading in mid-January could cause some investors to pull out.

After rushing to complete deals in time for the first quarter, issuers and arrangers pulled back last week, managing to complete about $4 billion in deals. That's well below the average weekly issuance of $10 billion so far this year, and sharply less than trader estimates of $7 billion. The market was simply catching its breath after a harried end to March, one trader explained.

Citigroup Global Markets grabbed the largest market share among U.S. ABS CDO underwriters in the first quarter of this year, according to data maintained by Thomson Financial. Citigroup rose up from third place at yearend 2005 and barely squeaked past Merrill Lynch, which some say has suffered from the loss of several key staff members earlier this year. Citigroup brought 14 deals to market totaling $6.8 billion, earning it the leading 15.2% market share. Citigroup had ranked third in the fourth quarter of last year with an 11.2% market share and 8 deals totaling $3.5 billion.

The sale of General Motors Acceptance Corp. relieved a number of ABS investors from wondering when the transaction would ever take place, but the sale is anticipated to have a somewhat minimal effect on the troubled U.S. automaker's securitizations. Market players noted tightening within certain GMAC transactions, and some speculated as to whether a new secured liquidity facility made available to the company could lower future securitization volume.