The primary market may have seen new issuance volumes flatline this month, but as we settle into the second half of August, it’d be wholly wrong to characterize the past few weeks as a typically-sleepy securitization summer.
The sustained market volatility has continued to keep pulses racing for most of the past few weeks, with the U.S. debt ceiling wrangle and still-unresolved European sovereign debt crisis helping to trigger major sell-offs across credit markets. But while European securitization paper was not immune to the volatility, certain senior AAA tranches of prime U.K. and Dutch deals were thrust in the odd position of being tagged as a safe haven for investors. This comes as large swathes of other bond markets went into freefall. As one trader confided in SI recently, it was all a far cry from the dark days of 2008 when asset-backed securities were thrust into the spotlight as the “demon stepchild” of the financial markets.
Behind the scenes, firms were facing an extra workload in amending deal structures ahead of Standard & Poor’s revised counterparty criteria taking effect, as SI noted back in June. Nationwide Building Society is the latest firm to propose a master trust overhaul, and market officials now reckon a new Silverstone issue could be on the horizon.
Just not quite yet. Syndicate chiefs at a number of investment banks in London expect the primary issuance pause to linger a few weeks longer, as investors opt to stay on the sidelines—or at the beach, depending on who you talk to—and banks attempt to gauge the level of market demand for ABS paper. Liquidity has dried up to the point that one banker even drew grave comparisons to those fateful, few weeks in mid-2007.
Your guess is as good as any as to what’s in store for next summer.