Monday 23 January 2017 11:21 London/ 06.21 New York/ 19.21 Tokyo

A look at the major activity in structured finance over the past seven days.

Pipeline
There was a clear skew towards auto ABS additions for the pipeline last week. As well as five of these deals, there was also a CMBS added.

That CMBS was US$1.261bn FREMF 2017-K61. The auto ABS were: US$1.116bn Ally Auto Receivables Trust 2017-1; US$1.135bn CarMax Auto Owner Trust 2017-1; US$1bn Drive Auto Receivables Trust 2017-A; US$750.2m Enterprise Fleet Financing Series 2017-1; and US$750m GMF Floorplan Owner Revolving Trust Series 2017-1.

Pricings
There was more variety to the week's prints. At the last count there were five ABS, two ILS, two CMBS and four CLOs.

The ABS were: US$750m Citibank Credit Card Issuance Trust 2017-A1; US$1.75bn Citibank Credit Card Issuance Trust 2017-A2; US$1.672bn Ford Credit Auto Owner Trust 2017-A; US$477.1m SoFi Consumer Loan Program 2017-1; and US$123m SolarCity 2017-A.

US$525m Galilei Re Series 2017-1 and US$200m Vitality Re VIII accounted for the ILS. The RMBS were US$1.351bn CAS 2017-C01 and €157.7m Delft 2017.

Lastly, the CLOs were: US$497m Carlyle Global Market Strategies CLO 2014-2R; €307m Phoenix Park CLO 2014-1R; US$410m Sound Point CLO 2014-3R; and US$527.63m Venture CDO 2017-26.

Editor's picks
Net negative: Privatisation of Fannie Mae and Freddie Mac could have widespread negative consequences for the US RMBS and CMBS markets, as well as on availability of credit for the housing market. Encouraging private label issuance to step in as the GSEs scale back remains a significant challenge...
Varied approaches: The horizontal retention piece of a securitisation could be considered the very definition of a Level 3 asset: rarely traded - if ever - with very limited market information. Subject to fair value assessment before and after a deal closes, market participants are taking a number of different valuation approaches to such assets, with no single method yet considered to be best practice...
Duration risk: The December interest rate hike in the US reflected the increasing health of the economy, but it also created issues for the US Fed's large book of MBS, which make up US$1.7trn of its balance sheet. Indeed, rising rates bring the spectre of duration risk for certain fixed rate assets, such as Fannie Mae 30-year mortgage pools...
Cautious optimism: The secondary market for capital relief trades has been growing alongside issuance of syndicated deals, which account for approximately 50% of CRT volume. In spite of a number of hurdles, market participants remain positive about the future of secondary trading in the sector...
CLO test ahead: The second session in a row of high BWIC volumes looks set to test the depth of the US CLO mezz rally seen so far in 2017. "It's another busy day in 2.0 mezz, which should truly test the market," says one trader. "We're sensing a little bit of exhaustion from buyers in 2.0 single- and double-Bs and saw a fair amount of DNTs yesterday..."

Deal news
• The US CMBS 2.0 market has seen its biggest loss to date, following the liquidation of the US$48.9m Hudson Valley Mall loan - securitised in CFCRE 2011-C1 - at an 80.4% severity on the US$52.4m original balance. The loss forced full write-downs on the NR, G and F classes, while the triple-B minus rated E tranche absorbed a US$7.2m hit.
• Further details have emerged of Deutsche Bank's recent capital relief trade, Gate 2016-1 (SCI 3 January). The €95m six-year bilateral CLN pays three-month Euribor plus 12.75% and references a €1bn portfolio of German SMEs.
• Fitch highlights Delft 2017 (SCI 12 January), which it hasn't rated, as an example of an RMBS that could expose investors to the strength and liquidity of housing and lending markets in a concentrated period near bond maturity. The agency says that such concentrated refinancing risk in portfolios of high LTV ratio interest-only mortgage loans can result in rating caps for RMBS.

Regulatory update
• The US Department of Justice, 21 states and the District of Columbia have reached a nearly US$864m settlement agreement with Moody's, Moody's Analytics and their parent Moody's Corporation. The settlement resolves allegations arising from Moody's role in providing credit ratings for legacy RMBS and CDOs, including pending state court lawsuits in Connecticut, Mississippi and South Carolina, as well as potential claims by the Justice Department.
• Société Générale has agreed to pay a US$50m civil penalty to the US Department of Justice to resolve claims under the Financial Institutions Reform Recovery and Enforcement Act related to its activities in connection with the marketing, sale and issuance of an RMBS dubbed SG Mortgage Securities Trust 2006-OPT2. As part of the agreement, the bank has acknowledged in writing that it made false representations to prospective investors in SG 2006-OPT2, which suffered significant losses.
• The US Environmental Protection Agency (EPA) has issued a notice of violation of the Clean Air Act to Fiat Chrysler because of the installation and use of engine management software to manipulate diesel emissions. Moody's notes that this is credit negative for some US auto ABS.


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