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Asset Backed Securities - April 2013
Asset Backed Securities - April 2013
Asset Backed Securities - April 2013
ALL Auto Lease AAA Float (1-4) ALL Auto Loan AAA Float (1-4) ALL CMBS AAA Float (3-5) ALL Credit Card AAA Float (1-4) Australia RMBS AAA Float (1-3) Italy RMBS AA Float (3-5) Netherlands RMBS AAA Float (1-3) Spain RMBS AA Float (3-5) United Kingdom PRMBS ex. Granite AAA Float (1-3) United Kingdom PRMBS ex. Granite AAA Float (3-5) United Kingdom PRMBS ex. Granite AAA Float (5-8)
However, there are some serious concerns within the regions economy. Auto-manufacturers, retail and supermarket chains have all displayed poor sales results within Europe with unemployment/inflation still rising. There have been substantial injections of liquidity from major central banks. The most recent injection came from the Bank of Japan, and was aimed at helping the financial and housing markets to de-correlate their results from the economy. Eurostat has recently started publishing a quarterly analysis of the European housing market, starting from January 2010. It is evident that Spain, Ireland and Italy are clearly well below 100. This months highest performers include the UK and Belgium. Overall France remains the best performing country, as it has been for the past two years. The house price index levels for the Netherlands have remained below 100 for more than a year now, despite the Dutch RMBS sector being the second tightest RMBS after the UK Prime RMBS.
European House Price Index (Source: Eurostat) Euro Area France Italy Netherlands Germany UK Belgium Ireland Greece Spain Hungary Sw eden
Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12
98.98 100.17 100.48 100.36 100.51 101.57 101.27 100.31 99.92 99.71 99 98.55
96.81 98.79 101.59 102.8 103.44 105.47 107.68 106.63 105.23 105.3 106.05 104.79
99.49 100 100.33 100.19 100.07 101.19 101.2 100.51 99.93 99.14 97.43 95.85
100.13 100.06 100.16 99.65 99.95 98.35 98.02 96.26 94.48 93.09 89.66 90.4
99 100.5 100.6 99.9 102.6 103.9 103.4 104.1 104.9 n.a n.a n.a
98.59 100.11 101.77 99.53 98.65 98.28 100.17 99.06 99.08 100.2 102.05 101.36
98.22 99.13 101.02 101.63 102.34 103.28 105.32 105.14 105.9 105.99 107.18 106.39
104.24 100.99 98.66 96.11 91.81 87.97 84.6 80.07 76.82 75.31 76.47 76.47
100.24 101.26 100.35 98.15 98.06 97.91 n.a n.a n.a n.a n.a n.a
99.91 101.52 99.33 99.24 95.78 94.64 91.99 88.15 83.76 81.03 77.98 76.88
101.09 100.59 100.1 98.22 97.96 97.15 95.85 95.41 96.51 92.85 92.13 90.08
97.86 99.27 100.61 102.26 102.54 103.16 102.94 100.48 101.93 103.07 103.78 104.3
There hasnt been a lot of volatility around the Granite tranches during April. The A and B tranches have shown some movement since the first one decreased by 0.25 cents and the second one increased by 1.6 cents. The A, B, M and C tranches are now traded at 98.14, 94.30, 90.75 and 86.34, respectively.
GRANM A Total Return and Price Volatility 110 108 Sector Level 106 104 102 100 98 Jan-12 Price Index Level 180 170 160 150 140 130 120 110 100 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 90 Jan-12 Mar-12 Price Index Level May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 Sector Level GRANM C Total Return and Price Volatility
Source: Markit
Source: Markit
The price matrix for Granite securities and especially the A tranche based on currency and rating will be limited in the coming months. It seems that the coupon difference between Granite deals and tight spreads on the secondary market start to finally have an effect on the cash price and the way investors are trading them. Moreover the Economics Commission of the Spanish Congress changed the mortgage market act this week, allowing more flexibility around four aspects for households in difficulties: -raising the threshold for maximum earnings in order to qualify for temporary suspension of eviction -expropriating houses owned by the banks in order to house people who have been evicted -allowing families who cannot meet their payments to enter a form of insolvency proceedings -retroactive application of donation in payment, halting evictions from first homes for mortgage delinquency, and allowing households affected by eviction orders to remain in the same home as tenants paying a social rent This initiative will clearly help the Spanish economy, but will negatively impact Spanish RMBS, since it will increase interest shortfall and decrease principal repayment. Finally in addition to the daily BWICs, the largest activity remained around the primary market with half a dozen deals priced in April.
European AAA RMBS (3-5yr WAL) Spread (bps)
1,600
UK SPRMBS UK PRMBS
UK SPRMBS
1,400
Dutch RMBS Irish RMBS (Single A)
UK PRMBS
1,200
Portuguese RMBS (Single A) French RMBS
2,400 2,000
Australian RMBS
Spanish RMBS
1,000 800 600 400 200 0 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
Dutch RMBS
1,600 1,200 800 400 0 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
6,000
Spanish RMBS
Spanish RMBS
Dutch RMBS
5,000
Dutch RMBS
4,000 3,000 2,000 1,000 0 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
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CMBS (3-5 yr WAL) Spread (bps) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
CMBS AAA CMBS AA CMBS A CMBS BBB Markit CMBX.NA.AAA Indices-S3 Markit CMBX.NA.BBB Indices-S3
UK RMBS AAA Spread (bps) 1,000 900 800 700 600 500 400 300 200 100 0 Jan-09 Jul-09 Cash Price (%) 100 90 80 70 60 50 40 30 20 10 0 Jul-12 Jan-13
Granite Master Issuer plc 2007-2 3A2 EUR Cash Price Aire Vy Mtgs 2005 1 plc 2 A2 EUR Cash Price
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
2,400 2,000 1,600 1,200 800 400 0 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
2,400 2,000 1,600 1,200 800 400 0 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
Primary Market
The primary market has been fairly active during April with half a dozen deals being priced. Once again the largest issuances came from the Dutch RMBS sector and were represented by Storm 2013-II BV and Saecure 13. Also active was the Auto ABS market. Moreover the primary market welcomed its second European Leveraged loan CLO issuance of this year; Dryden XXVII Euro CLO 2013 was issued last week with eight placed tranches, which include three fixed rate tranches totalling an issue size of 90m. The senior tranches are priced tighter with a margin of +135bps than the previously issued Cairn III senior tranche with a margin of +140bps.
Prim ary Market (Source: Markit RCD) Deal Country/Sector Class Av Rating Spread (bp) Amount ( mn)
Asset-Backed European Securitisation Transaction Eight Plc Dryden XXVII Euro CLO 2013
50 120 2.30% (Fixed) 135 2.93% (Fixed) 190 3.93% (Fixed) 290 400 475 38 40 83 40 82
257.80 48.70 69.00 100.50 9.40 21.60 11.60 6.40 13.00 17.50 549.00 150.00 550.00 275.10 848.30
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Economics Data
The Halifax and Nationwide HPI month-on-month increased in March at 0.2% and 0.0%, respectively. The Halifax index now shows a 1.1% increase year-on-year, compared with Nationwide, which is still lower at 0.8%. The Markit/CIPS UK Construction PMI posted another negative month at 47.2 in March for UK construction activity. As for last month, the decline was mainly due to commercial activity since the housing activity increased again and it is now at 50.8.
PMI housing 70 60 50 40 -5 30 20
UK Construction PMI Housing Activity Index Halifax house price index, all houses
House Prices
PMI housing 70 60 50 40
House Prices
-15 -25
30 20
UK Construction PMI Housing Activity Index Nationwide house price index, all houses
-15 -25
-35 10 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13
Source: Markit Economics, Halifax
-35 10 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13
Source: Markit Economics, Nationwide
Markit /Knight Frank House Price Sentiment index 80 70 60 50 40 30 20 10 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13
Source: Markit Economics, Knight Frank
Ratings Actions
Moodys has downgraded 120 tranches across 45 deals within the Spanish RMBS and small business loan sectors. The majority of affected securities fall within the senior and mezzanine tranches where securities previously rated A3 have been downgraded to Baa1 or Baa2. The downgrade affects six junior notes by one to three notches and six senior notes by one to two notches across the four Spanish RMBS deals - TDA CAM 7, 8, 10 and 11. The rating action reflects the insufficiency of credit enhancement to address counterparty and sovereign risk. Fitch Ratings has downgraded 14 tranches across the UK CMBS deals, including Business Mortgage Finance 4, 5 & 6 and London and Regional Debt Securities No2 PLC. The downgrade affects the mezzanine and junior tranches. Securities previously rated B have been downgraded to CCC and securities rated A have been downgraded to BBB-.
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Alexandria Cap Plc Annington Fin No 1 Atlantes Mtg No 1 plc Atlantes Mtg No 1 plc AyT Cedulas Cajas Glob Fondo Titul Activos Ayt Cedulas Cajas Fondo Titul Activos V & Vi AYT CEDULAS CAJAS X FONDO TIITULIIZACIION ACTIIVOS AyT GENOVA Hipo IV AyT Genova Hipo IX Fondo Titul Hipo Ayt Hipo III Fondo de Titul Hipo Bancaja - BVA VPO 1, Fondo de Titulizacion de Activos BANCAJA Fondo Titul Activos 3, 5, 6, 7, 8, 9, 10 & 11 Bancaja Leasing 1,FTA Bankinter Fondo de Titul de Activos 10, 11 & 13 Bankinter 2 PYME Fondo Titul Activos BANKINTER FTPYME FTA 3 & 4 BBVA FTPYME FONDO Titul ACTIVOS 3 & 6 BBVA Consumo Fondo de Titul de Activos 1, 2 & 4 BBVA Hipo 3 FONDO Titul ACTIVOS BBVA RMBS Fondo Titul Activos 1, 2 & 5 BELLATRIX ECLIPSE 2005 2 plc BUSINESS MORTGAGE FINANCE PLC 4, 5, 6 & 7 Cedulas TDA 2 Fondo de Titulizacion de Activos Cedulas Tda 3, 5, 6 & 7 Celf Ln Partners BV Citadel 2010-II B.V. CLOVERIE PLC CM Bancaja1 Fondo de Titul de Activos Cornerstone Titan 2005 1 plc Curzon Fdg Ltd DECO 2011-CSPK Limited Dryden X Euro CLO 2005 plc Dryden X Euro CLO 2005 plc Epic Drummond Ltd 1 EQUINOX ECLIPSE 2006 1 plc European Ppty Cap 3 plc EuroProp EMC SA Fermat Ltd Fondo de Titul de Activos FTPYME Santander 2 Fondo de Titul de Activos PYMES Banesto 2 Fondo De Titulizacion De Activos Santander Consumer Spain Auto 10-1 Forest Fin plc Forest Fin plc FTPYME Bancaja Fondo de Titul de Activos 2 & 3 GC FTPYME PASTOR 4 Fondo de Titul de Activos GC FTPYME SABADELL 6 FONDO DE TITULIZACION DE ACTIVOS GC PASTOR HIPOTECARIO 5 FTA GSC European CDO I R SA Hipocat Fondo Titul Activos 8, 9, 10, 11, 16 & 17 HipoTotta No. 7 Limited Im Bco Popular Ftpyme 1 Fondo de Titul de Activos IM Caja Laboral Fondo Titul Activos 1 & 2 IM Cajamar Empresas 2 FTPYME IM CEDULAS 4 FONDO Titul ACTIVOS IM GRUPO BANCO POPULAR FTPYME IIFTA IM Grupo Bco Popular Empresas 1 Fondo de Titul de Activos IM Grupo Bco Popular FTPYME I Fondo Titul Activos Im Pastor Fondo de Titul Hipo 3 & 4 Infinity 2006 1 Classico Jubilee CDO V BV LIGHTPOINT PANEUROPEAN CLO 2006 PLC LOCAT Secn Veh 3 SRL London & Regional Debt Secn No2 PLC London Wall 2006 1 Ltd LUSITANO MORTGAGES NO 6 LTD Lusitano Mtgs No 5 plc MADRID RMBS III FONDO DE TITULIZACION DE ACTIVOS OCI EURO FUND I BV PHARMA FINANCE 3 SRL Programa CEdulas TDA Fondo Titul Activos Promise I Mobility 2008-1 Plc PYME BANCAJA 5 Fondo Titul Activos RMF Euro CDO V PLC Ruralpyme Ftpyme Fondo de Titul de Activos 1 & 2 Selecta CDO Ltd Sestante Fin Srl 4 Sestante Finance S.r.l. 3 Silenus European Ln Conduit No25 Ltd Taurus CMBS Pan Europe 2006 3 PLC TDA Bancaja 4 Hipotecaria Tda Cam Fondo de Titul de Activos 1, 3, 4, 5, 6, 9 & 12 TDA CAM 12, Fondo de Titulizacion de Activos TDA CAM 2 TdA CAM 6 Fondo Titul Activos TDA PASTOR 1 TDA Pastor Consumo 1 Fondo Titul Activos TDA Pastor Consumo 1 Fondo Titul Activos VB DPR Finance Company 2006-1 Versailles CLO ME I plc Windermere VII CMBS plc Windermere VII CMBS plc
Ireland/CDO UK/CMBS Portugal/RMBS Portugal/RMBS Spain/CDO Spain/CDO Spain/CDO Spain/RMBS Spain/RMBS Spain/RMBS Spain/RMBS Spain/RMBS Spain/Equip Lease Spain/RMBS Spain/Small Business Loan Spain/Other Spain/Small Business Loan Spain/Other Consumer Loan Spain/CMBS Spain/RMBS UK/CMBS UK/CMBS Spain/CDO Spain/CDO Netherlands/CDO Netherlands/RMBS Ireland/CDO Spain/CDO UK/CMBS European/CDO Ireland/CMBS European/CLO European/CLO European/CMBS UK/CMBS European/CMBS European/CMBS European/CDO Spain/Small Business Loan Spain/Small Business Loan Spain/Auto Loan Austria/CMBS Austria/CMBS Spain/Small Business Loan Spain/Small Business Loan Spain/Small Business Loan Spain/RMBS European/CLO Spain/RMBS Portugal/RMBS Spain/CDO Spain/RMBS Spain/Other Spain/CDO Spain/Other Spain/Small Business Loan Spain/Small Business Loan Spain/RMBS Italy/CMBS European/CDO USA/CLO Italy/Equip Lease UK/CMBS European/CLO Portugal/RMBS Portugal/RMBS Spain/RMBS Netherlands/CDO Italy/Equip Lease Spain/CDO Germany/CDO (Synthetic) Spain/Small Business Loan European/CDO Spain/Small Business Loan European/CDO Italy/RMBS Italy/RMBS European/CMBS UK/CMBS Spain/RMBS Spain/RMBS Spain/RMBS Spain/RMBS Spain/RMBS Spain/RMBS Spain/Other Consumer Loan Spain/Other Consumer Loan European/Auto Loan European/CLO UK/CMBS UK/CMBS
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AAA Total Return Jan 2009 200 190 180 170 160 150 140 130 120 110 100 90 80 Jan-09
UK CMBS AAA GRANITE ONLY AAA UK SPRMBS AAA Global European CMBS AAA
140 135 130 125 120 115 110 105 100 95 90 85 80 Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
BBB Total Return Jan 2009 250 230 210 190 170 150 130 110 90 70 50 30 Jan-09
UK PRMBS BBB Dutc h RMBS BBB Spanis h RMBS BBB
UK SPRMBS BBB
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
0 Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
AAA Total Return Oct 2007 125 120 115 110 105 100 95 90 85 80 75 70
UK P RMBS A AA
130
UK PRMBS Granite Only A AA
UK SP RMB S AA A
Dutch RMBS A AA
Spanish RMBS AA A
Global European AB S A AA
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Source: Markit European Total Return Analysis Service
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Source: Markit European Total Return Analysis Service
BBB Total Return Oct 2007 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 215 200 185 170 155 140 125 110 95 80 65 50 35 20 5
UK P RMB S BB B
Dutch RMB S B BB
UK S PRMBS BBB
S panish RMBS BB B
Global European A BS B BB
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Source: Markit European Total Return Analysis Service
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Source: Markit European Total Return Analysis Service
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US ABS Market
Despite the volatility seen in the broader markets, specifically gold and equities, spreads across structured products remained relatively unchanged over the past month. Given the low interest rate environment and the likelihood of it continuing for the foreseeable future, we feel interest in the space will remain strong as investors seek higher alpha.
CMBS
In newer vintage paper, spreads were relatively unchanged, however, legacy paper saw some decent compression month over month. Attention continues to be focused in the AM / AJ parts of the capital structure as investors look to pick up some extra basis points in this sector. AMs were in almost 20bps on both 2006 and 2007 vintages.
Generic Markets (Spread to Swaps)
Vintage 2005 (CD1) 2006 (CD3) 2007 (GG10) 2011 (LC1) 2012 (LC3)
AM 70 95 475
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NonAgencyRMBSSectorYieldAnalysis
Prime Product Vintage Structure 60+DQ%* 06/07 SS <10 >10<20 >20 SUP <10 >10<20 >20 PT <10 >10<20 >20 Float <10 >10<20 >20 NAS/PAC >0<10 30YearFixed Yield 2005 Yield 06/07 SEN <10 >10<20 >20 SUP <10 >10<20 >20 HybridPrime Yield 2005 SEN <08 >08<15 >15 SUP <08 >08<15 >15 Yield
Legend
CollateralTypes: Fixed(FRM) Floating(ARM) Structure:
SS >0<05 >05<13 >13 SUP >0<05 >05<13 >13 PT >0<05 >05<13 >13 Float >0<05 >05<13 >13
3.068 3.668 4.170 06/07 Fixed <05 >05 Float <05 >05 15YearFixed Yield 04/05 Fixed 3.293 <03 3.602 >03 Float 3.000 <03 5.000 >03 Hybrids Yield 2005 SS <20 >2030 >3040 >40 SUP <20 >2030 >3040 >40 60+DQ Yield 2.795 3.530 3.500 3.407 06/07 06/07 SS >0<30 >30<40 >40<50 >50 SUP >0<30 >30<40 >40<50 >50 PT >0<30 >30<40 >40<50 >50 Yield SS 20%OrigCE <50 >50 40%OrigCE <50 >50 06/07 4.929 6.956 7.381 9.451 ProRata 1stPay 2nd/3rdPay LCF Sequential 1stPay 2nd/3rdPay LCF
SuperSenior Support NonAccel Snr PlannedAmortClass LastCashFlow Original PmtPriority Floater PassThrough
All structuresare brokenoutby collateral performance asdefined by60+Delinquency Ex: <10 >10<20 >20 OptionARM Yield 2005 SS 20%OrigCE 4.412 <50 5.664 >50 40%OrigCE 3.720 <50 4.494 >50 Subprime Yield 2005 ProRata 1stPay 2nd/3rdPay LCF Sequential 1stPay 2nd/3rdPay
Yield
06/07 Fixed <20 >2030 >3040 >40 Float <20 >2030 >3040 >40 Insurer Ambac MBIA(AAA) Assured(5yr) FSA(5yr)
Yield
Yield
Float 5.383 <10 4.183 >1020 4.025 >20 2.921 Monolines Bps(ex.MBIA,ABK) Insurer 81.5/83.5(SUR) Ambac 38.25/39.25 MBIA 410/430 Assured 390/410 FSA
4.300 3.911
TraceNonAgencyTradeActivity
7,000,000 6,000,000
Volume in000's
5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 1/2/2013 2/2/2013 Trade Volume 3/2/2013 SecuritiesTraded 4/2/2013
New issuance deals: Similar to March, the beginning of the month did not see much in the way of origination, but the latter half of the month saw two deals come to market from Redwood Trust (Sequoia) bringing this years total to 6 deals. The first deal is Sequoia Mortgage Trust 2013-5, which is $463 million in size; the pool is backed by 609 prime fixed rate mortgage loans, with a 772 FICO, 65.9% CLTV and is mostly California dominated (37.6%). The second Redwood Trust deal of the month is Sequoia Mortgage Trust 2013-6, which is $424.9m in size; the pool is backed by 545 prime fixed rate mortgage loans, with a 771 FICO, 66% CLTV with a heavy California concentration (37.1%). The two new Sequoia deals bring US RMBS origination to about $6.5 billion year to date with the Sequoia shelf making up a bulk of it with $3.1bn. At this pace we would reach close to $20bn in origination year; but we expect the number to be a little higher as we believe some of the larger banks may begin to reenter the market later this year, as we saw with JP Morgan last month.
Regulatory/Legal: On April 17th, Bank of Americas Countrywide unit reached a record $500m settlement with investors over mortgage backed securities that were downgraded to below investment grade. Bank of America said the settlement resolves claims on about 80% of the unpaid balance (UPB) of Countrywide-issued residential mortgage-backed securities, and 70% of similar claims against the bank overall. The settlement is separate from the $8.5bn Bank of America settlement over Countrywide securities which is scheduled for hearing on May 30, 2013. At the hearing, the Court will determine, among other things, whether to approve the settlement and make it binding on all certificate holders, and will consider other important matters. Investors are still expecting payouts will be more than 12 months out.
Ocwen continues to expand its mortgage service with the acquisition of Liberty Home Equity from Genworth Financial for a total of $22m on April 3rd. Liberty was the 3rd largest lender in reverse mortgages in the US. In another transaction, Ocwen purchased approximately $115bn in UPB of agency mortgage servicing rights from Ally Bank.
Consumer ABS
Consumer ABS spreads were generally stable into March month-end and throughout April as positive technicals and fundamentals persisted. Trading activity was focused around the usual top-tier names, FFELP subordinate bonds, but the market experienced an increase interest in higher yielding asset classes like franchise and containers, with the later seeing some drastic price changes as some dealers are predicting these deals will be called on their actual call dates. According to our generic spread matrix, auto and credit card spreads leaked out slightly wider; about +2 and +3bps for prime/subprime auto and credit card seniors, respectively. Subordinate spread movements were
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mixed, however, fixed-rate credit cards, with 3+ year paper, saw the largest movement (approximately +5bps wider). Student loan spread movements were generally positive, with most benchmark WAL bands tightening about 1 to 2bps. The matrix below shows a breakdown of the spreads for each asset class:
GenericSpreadsbySector
Prime AutoLoan Class A Class B FIX FIX WAL Spread 02 6 2+ 14 02 32 2+ 46 Credit Card Class A Class A FIX FLT 03 10 3+ 31 03 8 3+ 21 FFELPStudent Loan Class A Class B FLT FLT 05 30 5+ 65 5+ 262 Private Student Loan Class A FLT 02 67 25 201 5 10 343 Class B FLT Credit Card Class B FIX 03 46 3+ 101 03 33 3+ 54 Class B FIX Subprime AutoLoan Class A FIX WAL Spread 01 12 1+ 28 02 42 2+ 68
Secondary BWIC volume was slightly down month-over-month, with approximately $3.8bn of consumer ABS bonds out for the bid, as investors appeared to be focused on the new issue pipeline. Auto-related collateral accounted for about 45% of the volume, with equipment ABS being the only asset class to have an up-tick in volume month-over-month. The table below shows a full breakdown across all asset classes:
USNewIssueABS*
Asset Class Auto Card Equipment Floorplan StudentLoan(FFELP) StudentLoan(Private) Total Amount (mm) 8,450.00 630.00 1,680.00 550.00 1,460.00 12,770.00 *March18 April 23
The ABS new issue market was robust once again this month, with about $12.7bn of consumer ABS hitting the market. Auto issuance is up over 15% month-over-month and has once again accounted for the lions share of the volume. Please see the table below for the full breakdown across all asset classes:
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ABSApproximate BWICVolume*
Asset Class AutoLease AutoLoan CreditCard Equipment Floorplan Motorcycle Receivables StudentLoan Total Original 350.00 1,240.00 620.00 430.00 110.00 10.00 30.00 1,020.00 3,810.00 Current 310.00 940.00 610.00 360.00 110.00 10.00 20.00 900.00 3,260.00
*March26 April 23
Agency
FHFA decided to extend the HARP program to 2015, which caused the spreads on higher coupon collateral to widen. Month to date flows in to the CMO sector have been 13.5bn. Investors have been interested in the front end of the CMO curve leading to buying of short PACS and stripped coupons backed by 15- and 20-year collateral. PAC and sequential spreads have tightened slightly over the last month. There has recently been an increased demand in lower coupon agency pass-through from money managers in the wake of unusually light trading activity and steady supply. Investors continue to opportunistically buy at any instances of widening, so spreads have been holding relatively firm. The prevailing belief from investors is that the Fed will maintain its accommodative Quantitative Easing policy for at least the remainder of 2013, which will bode well for the broader MBS market. Ginnie Mae recently proposed merging their GN and G2 pass-through programs in an attempt to improve liquidity. They have proposed ending GN issuance, with all new originations to be pooled into G2s. However, the existing GN shelf would still exist, and there is the possibility that GNMA will provide a tender mechanism to give holders of GN the option to convert into G2.
CLO
Throughout the first few weeks of April CLO spreads experienced sideways movement, with some tightening in the lower part of the capital structure and EUR paper, reversing the movement seen in March. However, of late, spreads across the stack on this side of the Atlantic have seen a distinct move tighter. Prepayment assumptions on US CLOs also continue to move higher as well, reflecting the strong re-financing currently going on in the corporate loan space.
Generic Markets (DM) 1.0 80-115 150-190 250-290 365-425 550-650
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Philippe Pagnotta
Director, Structured Finance Markit Tel: +44 20 7260 2214 Email: philippe.pagnotta@markit.com
Matthew Fiordaliso
Director, Structured Finance Markit Tel: +1 212 205 1295 Email: matthew.fiordaliso@markit.com
Reena Mistry
Assistant Vice President, Structured Finance Markit Tel: +44 20 7260 2186 Email: reena.mistry@markit.com
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