Securitization

By in large, savvy market players seem to favor the CDO of home equity bonds over the underlying bonds themselves, given the added structure, mix of issuers and regions, as well as the pick up in absolute yield. While three-year triple-A home equity-focused CDOs are pricing within a few points of comparable HELs -both currently in the mid 30s - the CDOs are indexed off the three-month Libor compared to the one-month Libor, which picks up about 25 basis points on today's curve.

Issuance of home equity line of credit-backed ABS is on a torrid pace halfway through the year - having topped the $10 billion mark last week - and spreads are starting to show the effects of the supply. After having pushed the 20 basis point threshold over Libor, spreads have moved out on recently priced transactions to the mid-20 basis point area over Libor.

With the closing of the JPMorgan Chase/Bank One Corp. merger expected this week, the market is bidding a fond farewell to the final remaining Midwest investment bank's presence. Lead mandates have trickled down - Banc One Capital Markets and JPMorgan Securities jointly led last week's Prestige Auto Corp. series 2004-1 deal, perhaps the final ABS with the BOCM stamp. The bank has liquidated its trading inventory and research dried up several weeks ago. It's understood that many BOCM ABS professionals were unwilling to move to JPMorgan's New York-based offices and are now fielding new job offers.

As the first half of the year rapidly approaches, issuers rushed to the U.S. ABS primary market last week, pricing $17.5 billion in new issue supply. Not surprisingly, with the Fed expected to begin its tightening cycle this week, real estate ABS had another busy week with over $13 billion circulating at week's end.

GMAC-RFC, the most prolific ABS issuer over the past year-and-a-half recently introduced a new securitization product backed by what could become a new sub-sector in the mortgage related ABS market. Residential Asset Acquisition Corp. Trust (RAAC), issued off the RAMP shelf, is backed by heavily seasoned collateral acquired by RFC's Principal Investment Activities group acquired from banks selling assets and prime scratch and dent loans. Many of the loans were repurchased by originators following deal clean-up calls, as factors shrank during the three-year-long refi wave.

For RMF, one of U.K.-based Man Investments' core investment managers, ramping up a second collateralized debt obligation was a piece of cake.

Lease Equity Appreciation Fund II, under the aegis of LEAF Asset Management, has filed with the Securities and Exchange Commission to raise up to $60 million via the sale of limited partnership interests.

Year to date as of 06/24 Term (days) 06/18 06/21 06/22 06/23 06/24 1-week

2004 2003 2002 ABS (Public and 144A) 346,966 276,124 225,491 ABS (Public and 144A excluding CDOs) 318,814 255,960 200,163 ABS (Public Only) 276,578 225,385 179,895 ABS (144A Only) 70,388 50,739 45,596 Non-Agency MBS 139,697 154,346 94,427 Agency MBS 166,272 361,014 216,039 CMBS 35,263 34,479 21,241 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 6,692.8 1 19.1 8 JP Morgan 5,326.3 2 15.2 8 Deutsche Bank AG 4,467.4 3 12.8 8 Wachovia Corp 3,158.9 4 9.0 4 Credit Suisse First Boston 3,120.2 5 8.9 7 Banc of America Securities LLC 3,105.2 6 8.9 6 Barclays Capital 2,355.2 7 6.7 6 Merrill Lynch & Co Inc 2,002.4 8 5.7 3 Goldman Sachs & Co 1,256.2 9 3.6 1 Lehman Brothers 870.7 10 2.5 2 Industry Total 34,972.4 - 100.0 38 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 4,395.8 1 15.6 8 UBS 3,917.0 2 13.9 6 Wachovia Corp 3,117.4 3 11.1 13 Deutsche Bank AG 2,255.2 4 8.0 6 Citigroup 1,840.5 5 6.5 9 Credit Suisse First Boston 1,772.4 6 6.3 4 Bear Stearns & Co Inc 1,549.8 7 5.5 5 Banc of America Securities LLC 1,391.9 8 4.9 9 Morgan Stanley 1,164.6 9 4.1 4 Royal Bank of Scotland Group 1,005.8 10 3.6 3 Industry Total 28,151.5 - 100.0 79 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 7,026.3 1 26.9 10 Citigroup 4,698.4 2 18.0 10 Lehman Brothers 3,744.2 3 14.3 7 BANK ONE Corp 3,350.0 4 12.8 5 Barclays Capital 2,349.4 5 9.0 6 Deutsche Bank AG 1,324.7 6 5.1 6 Credit Suisse First Boston 1,194.3 7 4.6 4 Banc of America Securities LLC 818.0 8 3.1 4 Merrill Lynch & Co Inc 752.2 9 2.9 2 Goldman Sachs & Co 425.0 10 1.6 2 Industry Total 26,157.4 - 100.0 42 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 1,708.0 1 40.8 3 Credit Suisse First Boston 1,058.0 2 25.3 3 HSBC Holdings PLC 708.0 3 16.9 2 Morgan Stanley 250.0 4* 6.0 1 ABN AMRO 250.0 4* 6.0 1 Banc of America Securities LLC 212.0 6 5.1 1 Industry Total 4,186.0 - 100.0 6 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 Corp 26,848.0 1 12.4 29 Royal Bank of Scotland Group 23,821.0 2 11.0 45 Lehman Brothers 21,884.6 3 10.1 49 Credit Suisse First Boston 17,436.3 4 8.1 35 Bear Stearns & Co Inc 17,345.2 5 8.0 37 Morgan Stanley 16,754.5 6 7.8 38 Citigroup 14,049.0 7 6.5 41 Deutsche Bank AG 13,827.9 8 6.4 41 Merrill Lynch & Co Inc 13,206.8 9 6.1 25 Banc of America Securities LLC 12,191.1 10 5.7 38 Industry Total 215,830.0 - 100.0 392 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 4,289.7 1 18.0 5 JP Morgan 3,207.9 2 13.5 6 Citigroup 2,986.6 3 12.6 4 Credit Suisse First Boston 2,745.6 4 11.5 4 Deutsche Bank AG 2,616.4 5 11.0 4 UBS 2,420.0 6 10.2 5 Morgan Stanley 2,275.2 7 9.6 5 Banc of America Securities LLC 1,781.4 8 7.5 2 Lehman Brothers 1,012.6 9 4.3 2 RBC Capital Markets 462.0 10 1.9 1 Industry Total 23,797.3 - 100.0 22 Source: Thomson Financial

Year to date as of Jun 23 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 126 126 126 126 Auto Loans/Recs 34,972 31,354 3,618 30,576 4,397 11,996 17,602 5,375 Comm. Mtg 1,258 375 883 1,258 229 593 410 Commercial Loans Corp Bond/Note 3,116 966 2,150 3,116 1,839 746 45 485 Corporate Loans 4,054 194 3,860 4,054 1,987 395 370 830 471 Credit Card Rec 26,157 10,099 16,058 22,294 3,864 18,819 650 4,739 700 1,249 Debentures 1,588 1,588 1,588 1,588 Equip Loans Equip. Leases 4,414 4,164 250 4,164 250 1,988 1,387 529 221 289 Floorplan Recs 4,186 4,186 4,062 124 3,836 350 Franchisee Loans 194 194 194 Home Impr Loans Installment Recs 1,797 1,797 1,797 1,797 Junk Bonds Leveraged Loans 1,174 64 1,110 1,174 38 10 284 842 Mixed Collateral 1,381 7 1,374 1,381 1,000 306 22 53 Mnfrd Housing Ct 200 200 200 200 Motorcycle Loans 2,740 2,740 2,740 313 1,923 504 Mutual Fund Fees 331 331 331 331 Non-Jumbo Mtg Ln 47,204 21,294 23,582 44,944 2,261 28,083 9,686 8,920 218 284 Oil Receivables Preferred Sec 2,382 1,053 1,330 2,382 2,038 158 186 Prv Issued Sec 865 391 380 865 865 Rental Car Rec. 2,400 1,300 1,100 2,400 1,300 1,100 Rev Cred/Home Eq 168,626 94,788 64,834 147,024 21,602 106,430 41,144 18,959 1,467 553 Sm Business Loan 828 828 828 828 Struc Fin Credit 11,165 4,697 6,468 11,165 3,458 1,496 4,730 1,392 Student Loans 23,797 454 21,858 19,344 4,453 11,151 3,239 3,844 3,663 1,808 Tax Liens Ticket Rec Timeshare Loans 621 386 236 621 471 150 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 49% Non-Jumbo Mtg Ln 14% Auto Loans/Recs 10% Credit Card Rec 8% Student Loans 7% Other 13%

BARCELONA - Close to 3,500 delegates attended last week's Barcelona bash, the market's largest four-day meet-and-greet, hosted each year by Information Management Network.

Changes in the language of engagement letters used by accounting firms prior to a transaction being offered have caught issuers and underwriters off guard. As a result, some deals initially scheduled for an earlier date are just hitting the market now and deals now in the planning stages could be in for a delay. The changes, which have been in the planning stages since last year, just recently came to fruition, and issuers have had trouble getting their arms around the new documentation.

Even though many in the market were basking in Barcelona last week, the U.S. primary ABS market made a respectable showing with just over $12 billion in new issuance circulating. Real estate ABS, in particular, had a busy week, with $6.37 billion either priced or marketing as of Thursday's close.