Abbey Can't Break the Habit

The most significant deal in the first half of October came from U.K. mortgage lender Abbey National, which issued a jumbo GBP1 billion transaction backed by prime mortgages via its Holmes Funding vehicle.

The triple-A deal, lead managed by Salomon Smith Barney and Citibank, was Abbey's second term MBS this year and the third in total. It was split into two Euro and three Sterling-denominated tranches. Around 60% of the total was in Euros reflecting high demand in continental Europe as investors clamored for quality paper.

An Abbey official said that the bank had not originally planned a further deal this year but was able to respond when it was clear that demand was high.

In a statement, Gareth Jones, the Abbey's managing director for treasury, said: "This is our second securitized deal this year and demonstrates the strategic importance we attach to this market as another source of long-term funding. Securitization becomes our fourth source of funding making us tremendously flexible and versatile."

Market pros also wondered at the timing of the deal, speculating that there may be a connection between it and the possibility that the Abbey may consider joining in the bidding war for NatWest Bank, a rival U.K. high street bank. Abbey would not comment on the speculation, beyond saying that it was reviewing the position of NatWest "very carefully, nothing more nothing less."