NEW YORK, March 24 (IFR) - ABS dealer offering levels were mostly unchanged on Monday across all asset classes, as the primary market remained quiet before the quarter-end.
Syndicate managers said that the majority of banks got their business done early last week, which was particularly robust with USD6bn pricing. Most books are closed for the quarter as of this week, sources said.
Only one USD400m auto-lease transaction from Hertz surfaced today, as well as a Canadian-dollar ABS issue from Ford Credit Canada, for C$644.3m, which is typically looked at only by Canadian investors. The Hertz deal started pre-marketing late last week.
The second-ever single family rental trade, from Colony American Homes, was also announced last week and continued pre-marketing today. JP Morgan and Credit Suisse have started to gauge investor demand for the USD514m deal, and those that attended meetings last Friday said that interest was strong.
Year-to-date ABS supply stands at USD49.8bn versus USD44.4bn at the same time last year, according to IFR data.
Triple A prime auto spreads widened by 1bp to 2bp across the curve as of last Friday, while five-year and seven-year Triple A FFELP student-loan ABS spreads tightened by 2bp, according to traders.
Overall, higher-yielding riskier ABS continued to see strong bids last week, bankers said, while the short cash surrogate ABS paper remained a bit soft.
"Over the past two weeks, the market has ventured deeper down in the capital structure and has seen increased trading in auto residuals," said Amy Sze, an ABS strategist at JP Morgan.
Prime auto ABS residuals have traded hands in the secondary market over the last two weeks, generating significant buzz, sources said. "Hedge funds and dealers have been the primary players in these trades," Sze said. "Given the excellent technicals for higher-yielding credits, we expect interest in residuals will expand."
The residuals are now pricing in the 7% to 9% range. "It should be cheaper than that," said the head of consumer ABS at a large investment bank. "The auto residual bid is out of hand."
The residuals are priced to conservative credit rating agency assumptions, the banker told IFR, which means they are priced to lower losses. This aggressive view of the product means that they are pricing richer than expected.
In the secondary ABS market, there was moderate bid-list volume today with investor interest looking at a mix of auto-loan and student-loan bonds.
In particular, a USD2m Hyundai floorplan auto ABS from last year went out for bid and received competitive levels of interest, observers said.
Elsewhere in the market, BlueMountain Capital Management priced its USD513.225m BlueMountain CLO 2014-1, which was upsized from an original amount of USD411m due to strong investor demand. Credit Suisse is leading the transaction.
The USD321.25m Triple A slice priced at Libor plus 1.52%, and the deal will close on April 30.
HFLF 2014-1: Barclays (structuring lead) and JPMorgan have issued price guidance for the US$400m 144A Hertz Fleet Lease Funding transaction. Subject to market conditions the transaction is expected to price on Tuesday. The Triple A class is sized at US$355.6m and has a weighted average life of 1.89-years. Guidance for that slice is one month Libor plus 42-44bp.
FASTR 2014-R2: RBC, CIBC, Scotia Capital, and TD Securities have announced the C$644.3m Ford Canada (FASTR 2014-R2) auto loan ABS. Ford Credit Canada is the six-tranche deal contains three Triple A slices.
CAH 2014-1: The second-ever single family rental deal will be collateralized by a US$513.6m loan secured by mortgages on 3,399 income producing single-family homes. Moody's, Kroll and Morningstar have assigned Triple A ratings to the senior classes. JPM and Credit Suisse are expected to be joint leads.
BlueMountain CLO 2014-1: The US$513.225m trade priced via Credit Suisse. The Triple A printed at Libor plus 1.52%. Payment dates are the 30th of January, April, July, and October.
Reporting by Adam Tempkin; Editing by Natalie Harrison