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

Pipeline
The increased rate of deals entering the pipeline continued last week with seven new names announced. Two CMBS deals (US$1bn Freddie Mac SPC series K-705 and US$1.154bn GS MST 2012-GC6) were joined by two Canadian ABS transactions (Master Credit Card Trust 2012-1 and Canadian Capital Auto Receivables Asset Trust II series 2012-1). There were also two ILS transactions (US$100m Ibis Re II 2012-1 and US$150m Kibou) and a solitary CLO (US$400m Ares XXIII CLO).

Pricings
The majority of last week's prints were in the ABS sector, but one CLO priced as well (US$388m Symphony CLO VIII). Included among the pricings were two auto ABS deals (US$1.16bn Ford Credit Auto Owner Trust 2012-A and US$1.25bn Volkswagen Auto Loan Enhanced Trust 2012-1), a single credit card issue (US$844m GE Capital Credit Card Master Note Trust Series 2012-1) and a single student loan transaction (US$276m South Texas Higher Education Authority 2012-1). In addition, a servicing advances ABS (US$548m American Home Mortgage Servicing 2012-1) and finally one RMBS deal (US$4bn-equivalent Holmes Master Issuer 2012-1) printed.

Markets
The 'January effect' was still much in evidence over the last week in most structured finance markets.
In ABS, JPMorgan analysts say: "The second tier names/asset classes - such as floorplan, non-prime auto and rental car - are seeing better bids, while cash surrogates have continued to do well. The primary market is also off to a blazing start in 2012 with US$12bn in year-to-date supply...Even with the heavy supply, auto paper in secondary continues to see great demand and trades rich to primary."
Over the last week triple-B credit card ABS tightened by 5bp to 20bp and subprime auto subordinate tightened by 10bp to 25bp across maturities. In addition, two- and three-year triple-A stranded asset spreads also narrowed by 2bp. Meanwhile, the JPM analysts say triple-A UK RMBS spreads widened by 5bp across the curve.
US RMBS moved the opposite way, albeit slightly, according to residential credit analysts at Barclays Capital. "Non-agency cash bonds participated in the [wider market] rally to a modest extent, with jumbo and alt-A prices up approximately half a point w/w. Meanwhile, the ABX and PrimeX indices were significantly higher w/w, with prices up 2-3 points across most indices."
However, the Barcap analysts add that with many accounts focused on Thursday's Maiden Lane II sale, trading volumes were lighter last week versus last week and in line with average daily volumes over the past three months.
There was a different pattern in US CMBS as the market exhibited what Citi securitised products analysts call a curve "twist", as investors sold the top of the capital stack and bought lower in credit. As a result, duper spreads - which had come in by 21bp-52bp from the end of 2011 - saw profit taking and widened back out by 5bp-17bp on the week. GG10s widened by 5bp to 255bp after rallying 20bp since year-end.
But, the Citi analysts add: "With improving sentiment in the market, investors put these proceeds back to work down the credit curve into the AM and AJ sectors." They report that AJ volume was noticeably higher in a holiday-shortened week, with BWICs totalling US$283m in AJs, the highest such level since mid-2011. At the same time, the AM sector is seeing much improved liquidity, as dealers have begun making two-way markets on these bonds.
European CMBS too is seeing an uptick in activity. CRE debt analysts at Deutsche Bank say: "Benchmark names such as TMAN 6 A and TMAN 7 A advanced a few points higher on the week and taking their price gains for the year to around five points or so. Other benchmark names such as MALLF also benefitted from the risk-on appetite, advancing around one and a half points. This strong activity was accompanied by a ramp up in BWIC activity, with lists totalling over €80m circulating today [20 January]."
At the same time, there were positive signs in the US CLO market. Bank of America Merrill Lynch CLO analysts say: "Buoyed by strong sentiment, CLOs continue to move tighter on good volumes, with double-Bs leading the charge. We are mindful not to expect a one-way move tighter in 2012, and some degree of caution remains warranted in our view."
Nevertheless, they continue: "Secondary spreads have continued to behave very well across the capital structure over the past couple of weeks, on good volumes (US$250m-US$300m of BWIC volumes each week). With risk very much on in fixed income assets, the longer duration assets have performed the best, with double-Bs moving around 200bp since the start of the year."

Deal news
• The New York Fed has sold US$7bn in face amount of assets from its Maiden Lane II (ML II) portfolio to Credit Suisse through a competitive process. The regulator says the transaction was prompted by an unsolicited offer from Goldman Sachs to BlackRock Solutions, the investment manager for ML II, in January 2012 to buy a portion of ML II assets.
• S&P has published an unsolicited comment on the Sequoia Mortgage Trust 2012-1 RMBS, which is expected to close on 27 January. The agency has reviewed the preliminary term sheet filed with the SEC and the publicly available loan-level data on this transaction, and says that the collateral characteristics compare favourably to an S&P archetypical pool.
• The borrower behind the Titan Europe 2006-4FS CMBS has given notice in connection with the Four Seasons loan that it will not meet the minimum prepayment amount. As a result, investors will receive a step-up in coupon for both the class A1 and A2 notes.
• Freddie Mac has priced a 2.06% US$3bn mortgage-linked amortising note (MLAN) security due on 15 January 2022. MLANs are senior unsecured debt obligations whose cashflows mimic the principal payments of referenced agency mortgage-related securities held in Freddie Mac's mortgage-related investments portfolio.
• Banco BPI is set to purchase only €149.3m from its recent fixed tender offer for over €2bn of Douro RMBS. With a take-up rate of less than 7%, far fewer bonds were tendered then had been expected.

Regulatory update
• The FDIC has approved a notice of proposed rulemaking (NPR) that would require certain large insured depository institutions to conduct annual capital-adequacy stress tests. It has also approved a final rule requiring an insured depository institution with US$50bn or more in total assets to submit periodic contingency plans for resolution in the event of the institution's failure.
• The US SEC has charged UBS Global Asset Management with failing to properly price securities in three mutual funds it managed, resulting in a misstatement to investors of the NAVs of those funds.
• CPSS and IOSCO have published their final report on the OTC derivatives data that should be collected, stored and disseminated by trade repositories (TRs). The committees support the view that TRs, by collecting such data centrally, would provide authorities and the public with better and more timely information on OTC derivatives.
• Recent reforms of the INFONAVIT Law should result in better asset quality in new mortgage loans that are eligible for securitisation in the future, according to Moody's. One of the most significant items from a credit perspective is that INFONAVIT will be able to originate peso-denominated mortgage loans.

Deals added to the SCI database last week:
Ally Auto Trust 2012-1
Arran Cards Funding 2012-1
CenterPoint Energy Transition Bond Co IV
Golub Capital Partners CLO 12
MMCA Auto Owner Trust 2012-A
Santander Drive Auto Receivables Trust 2012-1
SLM Student Loan Trust 2012-1

Top stories to come in SCI:
CDS documentation
Asian CLOs
Recruitment trends
US CLOs