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Holiday hangover persists, as ABS market squeaks by with another slow week
Asset Securitization Report--SourceMedia (October 16, 2006)
After coming off of an extended weekend, the ABS market had another relatively sedate week of production. By press time, market participants expected about $12 billion in ABS debt to come to market, although slightly more than a third of that had priced by then.
Despite the modest issuance for the week, spreads saw no major widening activity. One trader mentioned that while fixed-rate paper appeared to move slowly, spreads overall continued to move tighter.
Just a small amount of deals priced by press time. The BMW Floorplan Master Owner Trust, a $723 million deal, came to market via Deutsche Bank Securities and Morgan Stanley. The first tranche, a $700 million piece, priced flat to the one-month Libor. Meanwhile, the single-A rated tranche came in at nine basis points over the same benchmark.
Also, Morgan Stanley's ABS Capital 2006-HE7 deal, a $1.2 billion transaction, came to market. The .80-year, triple-A rated tranche priced at five basis points over the one-month Libor, while the 4.88-year tranche, which received slightly lower triple-B ratings, offered 205 basis points for their trouble, over the same benchmark. Later in the week, the $1.3 billion Structured Asset Securities Corp. 2006-BC3 transaction priced. Pricing talk put the triple-A, 0.81-year tranche at six basis points over the one-month Libor, while investors on the longer-dated, double-B piece expected to get 550 basis points over the same benchmark.
The Wachovia Auto Loan Owner Trust, a $1 billion deal, priced last week. Talk for that deal put the short-term tranche, being marketed to the asset-backed commercial paper market, priced at two basis points under Libor, with the double-B-rated, 3.5-year piece coming in at 100 basis points over swaps.
No big deals in the market:
"We do have a steady drumbeat of U.K. and Australian home equity deals in the background," one trader said. He added that despite the prospects of some large foreign HEL deals, "there are no massive card, auto [deals]. There is no massive anything out there."
In the meantime, the market anticipated several large home equity loan ABS deals from overseas. The GBP5.6 billion ($10.4 billion) Arkle deal, backed by U.K. RMBS deal was in the market, as well as a $2.2 billion transaction from First Franklin. Goldman Sachs was preparing a set of three home equity and scratch & dent transactions totaling about $1.6 billion. Credit Suisse's Home Equity Mortgage Trust was in the market with an $800 million transaction, and Deutsche Bank's ACE Securities Corp. was in the market with an $864 million home equity deal.
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