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European ABS – A Week In Review By Markit (Feb. 1-9) February 11, 2010

European ABS Pricing And Sectors
The most liquid sectors of the European asset-backed securities market widened slightly over the past two weeks. It is clear that investors have little confidence in maintaining the 100 basis spread level on U.K. prime and Dutch AAA residential mortgage-backed securities as both segments widened by 15 basis points. Granite AAAs saw its cash price decrease by 2.5 points to 90 from 92.5, despite a technical readjustment that doubled the constant prepayment rate to 30% and could have positively impacted the price. Generally, the pricing of the A, B, M and C tranches of Granite are traded at 90, 72, 62 and 33, respectively.

On the secondary market, the new Permanent 2010-1, VCL 11 and the new Bavarian Sky 2 have not followed the same tightening trend as the deals issued in the last quarter of 2009. These three deals are now marked at the following levels:

On the primary market, Hermes XIV A2, which was originally a retained deal, was made public. The security was re-priced at 115 bps, 1 bp wider than the original step-up margin due in February 2013, and up from its original pricing of 38. It is now traded at 120 bps.
Commercial mortgage-backed securities, U.K. subprime and Spanish RMBS are still improving. The U.K. CMBS market was impacted by more bad news as all properties under Epic (Industrious) plc have been sold off and ...

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