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More of the Same for the ABS Market: Players wait until after Labor Day for volume to hit both the primary and secondary markets
Asset Securitization Report--SourceMedia (August 18, 2008)
Last week proved to be another period of slow issuance for the primary market, and trading in the secondary was not that much more active.
Both traders and investors reiterated their expectations that the ABS sector will not see much in the way of volume until after Labor Day.
Deals that did hit the market were heavy in credit card debt. Indeed, although issuance in the consumer and commercial ABS sectors might be down 28% from the same period last year - with volume dropping in both autos and student loans - it has gone up in credit cards, according to a report from Merrill Lynch last week.
However, card sector spreads continue to widen because of the uncertain economic outlook, ABS traders agreed.
Spreads on the five-year triple-A credit card floaters priced at 130 basis points over their benchmarks, equivalent to the widest levels in the March widening, UBS noted in a recent report. "This reflects heightened concerns for consumer credit as the economy continues to falter and unemployment estimates rise," the bank said.
JPMorgan Securities, Banc of America Securities and Merrill Lynch arranged $500 million in triple-A rated class A notes for Chase Issuance Trust (2008-12).
At issuance, the total invested amount of notes outstanding for the trust will be approximately $67.43 billion, comprising $59.17 billion of class-A notes, $4.09 billion of class-B notes, and $4.18 billion of class-C notes. The issuance was slated to close last Friday after ASR's deadline.
American Express Credit Account Master Trust Series 2008-7 also hit the market via Banc of America Securities, JPMorgan and RBS Greenwich Capital. The deal, totaling $597 million, was also expected to close last Friday.
The triple-A-rated class-A tranche, which totaled $525 million, had price talk of 130 basis points over one-month Libor, according to a presale report from Moody's Investors Service. The $32.81 million class-B tranche was rated 'A2' by Moody's and had price talk of 325 basis points over one-month Libor.
BA Credit Card Trust issued two series of notes last week, structured into class A (2008-10) and Class B (2008-4) notes. Banc of America Securities served as the underwriter on both series.
The triple-A-rated class A notes totaled $500 million and were priced at 130 basis points over one-month Libor, according to a Moody's presale report. The 'A2'-rated class B notes totaled $275 million and were priced at 300 basis points over one-month Libor.
Issuance is trickling in on the CLO side as well. The global CDO pipeline totals $12 billion, according to a report from JPMorgan, with arbitrage CLOs accounting for $2.8 billion.
Bid lists also continue to flood the market from SIVs and CDO liquidations and an unending series of downgrades, according to UBS and several traders.
So far, Standard & Poor's has reported that 210 SF CDOs received notices of events of defaults (EODs) which together account for more than $226 billion in assets. Among these, 65 transactions, or 30%, have gone into the liquidation stage after reporting the EODs, JPMorgan said.
The bank expects the next round of CDO EODs and a spike in liquidations to come as soon as there are further RMBS downgrades.
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