CDOs

With the slowdown in new issue ABS supply ahead of quarter-end, secondary trading - particularly for higher-yielding alternatives - picked up significantly last week. At least one bid list per day circulated from both smart-money profit takers and forced sellers, sources reported. Most of the bonds to hit the street, noted sources, were backed by manufactured housing.

While Citigroup Global Markets maintained its first quarter lead in the ABS league tables, two through five was tossed like a salad in the busy final week of the quarter, according to numbers officially released by Thomson Financial (see full league tables, p. 26-34). When the croutons landed, however, Lehman Brothers had separated itself from the pack as the clear No. 2 behind Citigroup, having claimed about $6 billion of credit on March 30.

The recently launched Freedom Park conduit makes use of just about every bell and whistle available to the ABCP market. According to Promontory Group, the parent company of Freedom's administrator, the vehicle is structured to address today's most notable challenges, including changing accounting rules, disappearing liquidity and evolving regulatory capital adequacy guidelines.

The public markets' equity researchers may garner more television appearances, but there's no shortage of commentary swirling from fixed-income CDO think tanks. Equity tranches within CDOs are the new hot topic for the CDO market, as one bank's research group claims some market documentation is more worthy of the trash can than investors' attention.

Mellon Bank is gearing up to issue its fourth transaction backed by insurance premium finance loans originated by its AFCO subsidiary, according to an S-1 filing with the Securities and Exchange Commission.

After the heaviest quarter the U.S. ABS market has ever seen, players loosened their belts last week for a collective breather. With more than $175 billion of new issue supply pricing during the first three months - an average of $13.5 billion a week and an unbelievable $700 billion annualized pace - transaction volume last week totaled just $6.7 billion, not surprisingly weighted heavily towards the mortgage sector.

The interest-only loan - a product that used to be the exclusive province of prime borrowers and wealthy homeowners looking to manage their finances - has begun to make inroads in the subprime market, according to a recent report from UBS.

Year to date as of 04/01 Term (days) 03/26 03/29 03/30 03/31 04/01 1-week

2004 2003 2002 ABS (Public and 144A) 150,845 121,339 99,613 ABS (Public and 144A excluding CDOs) 134,225 115,104 90,735 ABS (Public Only) 123,719 104,380 81,926 ABS (144A Only) 27,126 16,959 17,688 Non-Agency MBS 41,804 63,234 40,478 Agency MBS 46,451 215,452 127,204 CMBS 10,773 11,957 9,170 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 4,497.4 1 26.4 5 Deutsche Bank AG 3,292.0 2 19.3 5 JP Morgan 2,892.7 3 17.0 4 Banc of America Securities LLC 1,263.5 4 7.4 2 Goldman Sachs & Co 1,256.2 5 7.4 1 Credit Suisse First Boston 1,242.7 6 7.3 3 Barclays Capital 977.7 7 5.7 2 Merrill Lynch & Co Inc 815.0 8 4.8 1 Banc One Capital Markets 675.0 9 4.0 2 Royal Bank of Scotland Group 133.0 10 0.8 1 Industry Total 17,045.2 - 100.0 16 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 UBS 2,172.0 1 20.5 3 Merrill Lynch & Co Inc 1,614.9 2 15.2 4 Citigroup 1,516.0 3 14.3 4 BNP Paribas SA 919.5 4 8.7 1 Bear Stearns & Co Inc 658.9 5 6.2 2 Royal Bank of Scotland Group 603.8 6 5.7 2 Wachovia Corp 510.0 7 4.8 4 First Tennessee Bank 492.3 8 4.6 1 Deutsche Bank AG 435.4 9 4.1 1 Banc of America Securities LLC 380.9 10 3.6 2 Industry Total 10,603.6 - 100.0 26 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 3,100.4 1 24.6 4 Banc One Capital Markets 2,775.0 2 22.0 4 JP Morgan 2,025.0 3 16.1 4 Lehman Brothers 1,400.0 4 11.1 4 Barclays Capital 1,125.0 5 8.9 2 Merrill Lynch & Co Inc 752.2 6 6.0 2 Morgan Stanley 375.0 7 3.0 1 Goldman Sachs & Co 350.0 8 2.8 1 Credit Suisse First Boston 250.0 9* 2.0 1 Banc of America Securities LLC 250.0 9* 2.0 1 Industry Total 12,602.6 - 100.0 19 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 1,000.0 1 74.1 1 Credit Suisse First Boston 350.0 2 25.9 1 Industry Total 1,350.0 - 100.0 2 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 Royal Bank of Scotland Group 11,412.0 1 12.0 17 Lehman Brothers 10,094.4 2 10.6 22 Citigroup 8,755.9 3 9.2 22 Morgan Stanley 8,445.7 4 8.9 15 Deutsche Bank AG 7,180.6 5 7.6 22 Merrill Lynch & Co Inc 7,168.6 6 7.6 10 Credit Suisse First Boston 7,096.2 7 7.5 15 UBS 6,018.5 8 6.3 7 Countrywide Securities Corp 5,335.2 9 5.6 5 Banc of America Securities LLC 4,843.1 10 5.1 15 Industry Total 94,926.0 - 100.0 150 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 First Boston 1,869.4 1 18.3 3 Banc of America Securities LLC 1,531.4 2 15.0 2 Merrill Lynch & Co Inc 1,266.2 3* 12.4 2 JP Morgan 1,266.2 3* 12.4 2 Morgan Stanley 1,012.6 5* 9.9 2 Lehman Brothers 1,012.6 5* 9.9 2 Citigroup 781.4 7 7.6 1 UBS 530.0 8 5.2 1 Deutsche Bank AG 489.9 9 4.8 1 RBC Capital Markets 462.0 10 4.5 1 Industry Total 10,221.5 - 100.0 9 Source: Thomson Financial

Year to date as of Mar 31 Coupon Type Market Average Life Buckets Asset Class Volume Pub/144A Fixed Rate Floating Rate Public 144A 0.0 to 0.9 1.0 to 2.9 3.0 to 5.9 6.0 to 7.9 8.0 to 11.0 Aircraft Leases Auto Loans/Recs 17,045 14,154 2,891 14,515 2,530 6,778 7,258 3,009 Comm. Mtg 1,358 1,062 296 922 435 922 212 223 Commercial Loans Corp Bond/Note 466 466 466 363 103 Corporate Loans 1,492 20 1,472 1,492 1,177 226 89 Credit Card Rec 12,603 6,100 6,502 12,078 524 10,853 1,050 200 500 Debentures 650 650 650 650 Equip Loans Equip. Leases 1,537 1,537 1,537 911 626 Floorplan Recs 1,350 1,350 1,350 1,000 350 Franchisee Loans Home Impr Loans Installment Recs 1,797 1,797 1,797 1,797 Junk Bonds Leveraged Loans 404 27 377 404 404 Mixed Collateral 1,000 1,000 1,000 1,000 Mnfrd Housing Ct 200 200 200 200 Motorcycle Loans 625 625 625 625 Mutual Fund Fees Non-Jumbo Mtg Ln 27,318 10,844 16,364 26,525 794 15,128 5,115 6,987 47 40 Oil Receivables Preferred Sec 1,159 522 637 1,159 815 158 186 Prv Issued Sec 152 152 152 152 Rental Car Rec. 600 600 600 600 Rev Cred/Home Eq 67,608 33,519 34,088 56,982 10,625 45,332 13,637 7,924 617 98 Sm Business Loan Struc Fin Credit 5,751 2,306 3,445 5,751 1,876 846 2,688 340 Student Loans 10,222 378 9,381 8,323 1,898 6,148 1,295 1,122 639 1,018 Tax Liens Ticket Rec Timeshare Loans Tobacco Receives Trade Recs Unspecified/NA Note: Figures are preliminary and subject to change. Data includes U.S. deals and dollar Euro 144As.Source: Thomson Financial

Rev Cred/Home Eq 45% Non-Jumbo Mtg Ln 18% Auto Loans/Recs 11% Credit Card Rec 8% Student Loans 7% Other 11%

Year to date as of Mar 24 Coupon Type Market Average Life Buckets Asset Class Volume Pub/144A Fixed Rate Floating Rate Public 144A 0.0 to 0.9 1.0 to 2.9 3.0 to 5.9 6.0 to 7.9 8.0 to 11.0 Aircraft Leases Auto Loans/Recs 17,045 14,154 2,891 14,515 2,530 6,778 7,258 3,009 Comm. Mtg 1,358 1,062 296 922 435 922 212 223 Commercial Loans Corp Bond/Note 466 466 466 363 103 Corporate Loans 1,492 20 1,472 1,492 1,177 226 89 Credit Card Rec 12,603 6,100 6,502 12,078 524 10,853 1,050 200 500 Debentures 650 650 650 650 Equip Loans Equip. Leases 1,537 1,537 1,537 911 626 Floorplan Recs 1,350 1,350 1,350 1,000 350 Franchisee Loans Home Impr Loans Installment Recs 1,797 1,797 1,797 1,797 Junk Bonds Leveraged Loans 404 27 377 404 404 Mixed Collateral 1,000 1,000 1,000 1,000 Mnfrd Housing Ct 200 200 200 200 Motorcycle Loans 625 625 625 625 Mutual Fund Fees Non-Jumbo Mtg Ln 27,318 10,844 16,364 26,525 794 15,128 5,115 6,987 47 40 Oil Receivables Preferred Sec 1,159 522 637 1,159 815 158 186 Prv Issued Sec 152 152 152 152 Rental Car Rec. 600 600 600 600 Rev Cred/Home Eq 67,608 33,519 34,088 56,982 10,625 45,332 13,637 7,924 617 98 Sm Business Loan Struc Fin Credit 5,751 2,306 3,445 5,751 1,876 846 2,688 340 Student Loans 10,222 378 9,381 8,323 1,898 6,148 1,295 1,122 639 1,018 Tax Liens Ticket Rec Timeshare Loans Tobacco Receives Trade Recs Unspecified/NA Note: Figures are preliminary and subject to change. Data includes U.S. deals and dollar Euro 144As.Source: Thomson Financial

Rev Cred/Home Eq 45% Non-Jumbo Mtg Ln 18% Auto Loans/Recs 11% Credit Card Rec 8% Student Loans 7% Other 11%

At approximately $1.8 billion, catastrophe bond issuance nearly doubled in 2003 compared with previous years, sources at Moody's Investors Service reported. While the insurance sector issuer base has leveled off, corporates may become more active in the market, with at least one or two hopefuls in the pipeline, and even more kicking around the idea.