An Empty Market Brings No Deals


Nary a deal priced last week in the asset-backed market, though not for lack of want - demand fell into secondary trading, and spreads remained firm, despite volatility in other markets.

"The secondary is doing very well," one trader remarked. "We got off to a good start on Monday, and even though Tuesday swaps backed off a few basis points, we certainly did not widen as much through the week. We certainly outperformed swaps on the week."

The trader said that liquid bonds on the secondary were the focus for the first part of last week, and that the better names were getting most of the play.

"I think basically that guys that are getting involved want to be in something liquid," the trader said.

Other traders felt quite differently, however.

"If you got anything in the closet that you want to clean out, now's a good time to sell it," one trader said. "Because there's a bid out there, and there's not a lot of supply. People are just picking through it. And anything that's a little off-the-run that's got some yield, people have got some time to look at it, and their stepping out for it."

The reason for this, the trader explained, is that most players still believe there's room for spreads to move in, in light a vacuous pipeline.

A Piece of Equicredit

Dan Nigro of Chase Asset Management described a two-year piece of Equicredit home-equity that priced on Aug. 18 at 115 basis points over the benchmark over the two-year note.

"We owned it for a while and sold it in December at 95 over," Nigro said. "A portion of it is now being offered at 82 over the curb."

"And that's a short piece of paper," Nigro added. "Over the last two weeks of 1999, two and three to five-year-type home-equity paper came in five to 10 basis points, which is big for that maturity."

Nigro also said he was shown a bid list of CLO's.

"What was funny about that is that you never really see this stuff," he said. "The big knock on the paper, is once you buy it, you own it for life. And there was a size list of two or three-hundred million dollars that came out today."

A Cloudy Pipeline

As far as deals in the works, there's rumors that Lehman Brothers is fixing to bring a $1 billion home-equity deal, backed by B&C-type loans.

One trader noted that Prudential Securities is rounding up subordinates, compiling a CBO.

"Pru has been buying triple-B and single-A rated mezzanine pieces of home-equity," the trader said. "They're looking for subordinate pieces for a CBO. And we got a pretty good bid on some paper."

Auto deals from the top-tier names - including Ford Motor Credit and DailmerChrysler - are still expected to hit sometime soon, given the no show last quarter.

A banker who works on credit-card deals predicts the market will see more interesting collateral pools in deals to come.

"What I see is a lot more non-traditional credit card issuance coming up in the year 2000, because we do have a lot of non-traditional deals in the pipeline. By non-traditional I mean private label, but I'd also say we'll see a lot midprime type issuance," the banker said.

"We do see a lot of stuff coming mainly later on - starting February, March, April May - it's a little bit slow right now with people getting back from the holidays," he added.