Portuguese residential mortgage-backed securitizations have been pricing and trading at tight levels thanks to investors seeking to diversify their portfolios, according to London-based MBS investors and analysts. The Portuguese RMBS market's recent deals have been priced just outside those from the well-established Dutch market. "The demand for diverisification has exceeded the demand for benchmark names," says one securitization analyst.
"Banks can bring these deals very tightly, without a lot of history from the servicers," notes an investor. While he thought the spreads--27 basis points over three-month EURIBOR--were rich for Portuguese RMBS paper, he could see other investors wanting to diversify away from large repeat issuers from the U.K.
Analysts noted if any new deals were to come from Sweden or Ireland--relatively quiet markets--those would be priced tightly for the same reason. However, once markets like Portugal become more prolific RMBS issuers, their premium will not be as great. "Eventually, we will see a lot more credit tiering and pricing according to quality," says Sarah Barton, securitization analyst at Morgan Stanley in London.