CDOs

Even though the home equity and mortgage sectors of the securitization markets have experienced dramatic tightening since 3Q03, there is still room for appreciation in 2004, depending on where investors place their bets. In a pair of conference calls last week, researchers from Credit Suisse First Boston and UBS gave their respective opinions as to where value lies in the current market, and they shared surprisingly similar opinions.

A recent decision from a New York appellate court could cut into cash flows supporting the state's tobacco bond deals, according to a report from Moody's Investors Service.

In the midst of the winter ABS conference season, primary activity slowed last week. The presence of several large offerings, however, kept volume levels respectable. Through last Thursday, the U.S. ABS market had priced $8 billion, with an additional $1.5 billion hoping to wrap up in Friday's session.

A high yield CLO takes the prize for being the first visible U.S. CDO issuance to price in 2004. Sources report Light Point I, a $409 million arbitrage cash flow vehicle, priced in line with spread talk last week.

For a new kid on the ABS conference block, the American Securitization Forum (ASF) did well for itself as a solid showing flocked to attend ASF 2004, held last week at the Fairmont Scottsdale Princess in Scottsdale, Ariz. In fact, organizers have tentatively set a Jan. 23-26, 2005 date for next year's gathering. Unofficial estimates pegged this year's attendance at well over 1,000, a number that ASF Chairman Vernon Wright aims to double for next year's event.

The recent trend of capital infusion to the student loan sector, though positive, presents risks, said panelists at American Securitization Forum's ASF 2004 conference last week.

In the past year, unprecedented downgrades of senior CDO tranches caused many investors to ask: Does a triple-A rating imply less volatility?

With the recent volatility in the asset-backed market, investors - who get hardest hit when the going gets tough- should let their voices be heard louder, said participants at the "Investors' Perspective" panel at the American Securitization Forum's ASF 2004 conference.

The $1 billion manufactured housing portfolio that caused the Federal Home Loan Banks of New York so much trouble late last year - prompting a $169 million loss - resurfaced recently in a $252 million shelf offering from Credit Suisse First Boston's Asset Backed Securities Corp. issuance vehicle. Essentially a re-REMIC, this represents CSFB's first securitization of MH collateral from its principal finance vehicle - which, sources speculate, could account for a financial windfall for CSFB.

It was an exciting week of news in credit cards, as five high-profile issuers made the headlines in one way or another. Top-tier card issuers American Express and MBNA America Bank announced a first-of-its kind alliance. Former top-tier issuer Capital One Financial came one step closer to being top-tier again, and subprime specialist CompuCredit Corp. closed a transaction backed by loans it acquired from Providian Financial.

Year to date as of 02/04 Term (days) 01/29 01/30 02/02 02/03 02/04 1-week

2003 2002 2001 ABS (Public and 144A) 26,806 29,821 24,577 ABS (Public and 144A excluding CDOs) 26,806 28,986 24,128 ABS (Public Only) 22,402 27,169 22,756 ABS (144A Only) 4,404 2,652 1,821 Non-Agency MBS 1,846 14,637 9,578 Agency MBS 4,572 97,289 32,058 CMBS 418 2,337 649 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 Deutsche Bank AG 2,646.1 1 66.2 2 Citigroup 1,000.0 2 25.0 1 Credit Suisse First Boston 350.0 3 8.8 1 Industry Total 3,996.1 - 100.0 4 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 - - - - - Industry Total - - - - 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 1,599.6 1 66.6 2 Merrill Lynch & Co Inc 452.2 2 18.8 1 Lehman Brothers 250.0 3 10.4 1 Wachovia Corp 100.0 4 4.2 1 Industry Total 2,401.8 - 100.0 4 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 - - - - - Industry Total - - - - 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 Deutsche Bank AG 4,111.5 1 23.9 5 Credit Suisse First Boston 2,719.8 2 15.8 5 Bear Stearns & Co Inc 1,933.5 3 11.2 3 Citigroup 1,591.6 4 9.2 4 Morgan Stanley 1,560.4 5 9.1 2 JP Morgan 1,342.3 6 7.8 2 Royal Bank of Scotland Group 932.0 7 5.4 3 Barclays Capital 867.3 8 5.0 1 UBS 685.4 9 4.0 1 Wachovia Corp 652.0 10 3.8 2 Industry Total 17,228.4 - 100.0 23 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 Morgan Stanley 1,000.0 1* 33.6 1 Lehman Brothers 1,000.0 1* 33.6 1 Deutsche Bank AG 489.9 3* 16.4 1 Credit Suisse First Boston 489.9 3* 16.4 1 Industry Total 2,979.7 - 100.0 2 Source: Thomson Financial

Year to date as of Jan 28 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 3,996 2,437 1,559 2,199 1,797 3,345 423 228 Cash Commercial Loans Corp Bond/Note Corporate Loans Credit Card Rec 2,402 1,950 452 1,950 452 2,202 200 Equip Loans Equip. Leases Floorplan Recs Franchisee Loans Home Impr Loans Junk Bonds Leases Loans Mnfrd Housing Ct 200 200 200 200 Mutual Fund Fees Non-Jumbo Mtg Ln 5,166 518 4,648 5,166 458 725 3,923 59 Oil Receivables Preferred Sec Prv Issued Sec Rental Car Rec. Rev Cred/Home Eq 13,248 6,133 7,115 12,073 1,175 10,436 1,238 1,331 222 20 Sm Business Loan Struc Fin Credit Student Loans 2,980 210 2,770 2,000 980 2,000 980 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 47% Non-Jumbo Mtg Ln 18% Auto Loans/Recs 14% Student Loans 11% Credit Card Rec 9% Other 1%