UK_Prime_RMBS_Market_20071912

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					                                                                                        Markit Structured Finance Research
                                                                                                                                    19/12/2007



The UK Prime RMBS Market
A Week in Review: 12 – 19 December 2007
The Federal Reserve cut its main rate by 25bps last week, falling short of market participants’ expectations. This was
followed by the release of monthly figures which showed that US inflation was higher than analyst forecast with the
consumer price index rising by 0.8% in November and the y-o-y inflation rate reaching a peak at 4.3 %. All these
factors are definitely putting pressure on the US real rate and more importantly on the USD Libor and the dollar itself.

In the UK, inflation was up 0.3% on a month-on-month basis resulting in a y-o-y rise of 2.1%. This is just above the
Bank of England’s 2% target and should give it some freedom in 2008.

In the Eurozone, the y-o-y inflation rate has risen to 3.1 % in November, its highest point in the last six years. This is
putting the European Central Bank (ECB), which has injected an impressive amount of liquidity in the monetary
market since August and has kept its main rate on hold, under pressure. Market participants are confused as to what
action the ECB might take in the future. Contrary to other central banks, some believe the ECB could end up raising
its rate in 2008.

From an ABS perspective, this confusion is distorting the market of securities issued in dollars, British pounds or euro
because of the multi-floating rate structures of many European deals.

So far this situation is affecting the mortgage securitisation sector more than it is affecting the credit card, auto loans
or other non mortgage sector.

ABS Deteriorators

Short Name                Name                                Isin           Spread      Change      Rating   Sector                  Avg Life
PARAGMORT8 1 A2b EUR      Paragon Mtgs No 8 PLC               XS0203411144       111.084    25.32    AAA      PRMBS                         0.78
GRANMAST05-4 2005-4 A6 GBPGranite Master Issuer plc 2005 4    XS0229614465       121.858    20.56    AAA      PRMBS                       4.672
GRANMAST05-4 2005-4 A5 EURGranite Master Issuer plc 2005 4    XS0229614200       105.919     9.85    AAA      PRMBS                       2.115
BANCAJ10 10 A2 EUR        BANCAJA 10 Fondo Titul Activos      ES0312872015        97.255     8.44    AAA      RMBS                        4.066
DECO9 9 A2 EUR            DECO 9 Pan Europe 3 plc             XS0262561276        87.012     6.84    AAA      CMBS                        5.287



ABS Improvers

Short Name                Name                                Isin           Spread      Change      Rating   Sector                  Avg Life
CHESTER02-A UK2002-A A EURChester Asset Recs Dgs 2002 A PLC   XS0148912263        62.232     -9.41   AAA      Credit Card                   1.43
CHESTER-LTD 2005-A1 A EUR Chester Asset Recs Dgs Issuer Ltd   XS0229564348        54.068     -9.37   AAA      Credit Card                 1.054
AUTOABS04-1 1 A EUR       AUTO ABS COMPARTIMENT 2004 1        FR0010053868        51.503     -5.66   AAA      Auto Loan                   1.029
SCGA6 6 A EUR             SC Germany Auto 06 PLC              XS0266760700        55.025      -4.9   AAA      Auto Loan                   3.915
JMP1-05 1-2005 A EUR      Jump Srl 1 2005                     IT0003834386         58.35     -4.24   AAA      Other Consumer Loan         2.572




The presence in our Top 5 deteriorators of Granite and Paragon which have both reported problems recently does not
come as a surprise.
Markit Structured Finance Research




Both these UK Prime RMBS issuers are now traded at subprime levels as shown below:

                                                                            GRANMAST05-4 2005-4 A5 EUR                                                                                                                                                                                                                                                  GRANMAST05-4 2005-4 A6 GBP
  bps                                                                                                                                                                                                                                                                       bps

  120                                                                                                                                                                                                                                                                       120
                                                                                                                                                                                                                                                            2.9                                                                                                                                                                                                                                                                               2.9
  100                                                                                                                                                                                                                                                                       100
                                                                                                                                                                                                                                                            2.7                                                                                                                                                                                                                                                                               2.7
  80                                                                                                                                                                                                                                                        2.5             80                                                                                                                                                                                                                                                                2.5
                                                                                                                                                                                                                                                            2.3   Spread                                                                                                                                                                                                                                                                            Spread
  60                                                                                                                                                                                                                                                                        60                                                                                                                                                                                                                                                                2.3
                                                                                                                                                                                                                                                                  Av life                                                                                                                                                                                                                                                                           Av life
                                                                                                                                                                                                                                                            2.1                                                                                                                                                                                                                                                                               2.1
  40                                                                                                                                                                                                                                                                        40
                                                                                                                                                                                                                                                            1.9                                                                                                                                                                                                                                                                               1.9
  20                                                                                                                                                                                                                                                        1.7             20                                                                                                                                                                                                                                                                1.7
   0                                                                                                                                                                                                                                                        1.5                 0                                                                                                                                                                                                                                                             1.5
        01/06/2007

                     15/06/2007

                                  29/06/2007

                                                13/07/2007

                                                               27/07/2007

                                                                              10/08/2007

                                                                                              24/08/2007

                                                                                                              07/09/2007

                                                                                                                              21/09/2007

                                                                                                                                               05/10/2007

                                                                                                                                                                 19/10/2007

                                                                                                                                                                                   02/11/2007

                                                                                                                                                                                                      16/11/2007

                                                                                                                                                                                                                          30/11/2007

                                                                                                                                                                                                                                              14/12/2007




                                                                                                                                                                                                                                                                                    01/06/2007

                                                                                                                                                                                                                                                                                                 15/06/2007

                                                                                                                                                                                                                                                                                                              29/06/2007

                                                                                                                                                                                                                                                                                                                            13/07/2007

                                                                                                                                                                                                                                                                                                                                           27/07/2007

                                                                                                                                                                                                                                                                                                                                                           10/08/2007

                                                                                                                                                                                                                                                                                                                                                                           24/08/2007

                                                                                                                                                                                                                                                                                                                                                                                            07/09/2007

                                                                                                                                                                                                                                                                                                                                                                                                             21/09/2007

                                                                                                                                                                                                                                                                                                                                                                                                                               05/10/2007

                                                                                                                                                                                                                                                                                                                                                                                                                                                  19/10/2007

                                                                                                                                                                                                                                                                                                                                                                                                                                                                     02/11/2007

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        16/11/2007

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            30/11/2007

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                14/12/2007
The spreads of US $ securities issued by Granite are even wider. This is because of current monetary tensions and
despite the fact that they are based on the same pool of UK mortgages as their euro and GBP equivalents.

  bps                                                            GRANMAST06-4 2006-4 A1 USD                                                                                                                                                                                 bps                                                                         GRANMAST07-1 2007-1 1A1 USD

  250                                                                                                                                                                                                                                                      0.8              250                                                                                                                                                                                                                                                              0.75
                                                                                                                                                                                                                                                           0.75                                                                                                                                                                                                                                                                              0.7
  200                                                                                                                                                                                                                                                                       200
                                                                                                                                                                                                                                                           0.7                                                                                                                                                                                                                                                                               0.65
  150                                                                                                                                                                                                                                                      0.65             150
                                                                                                                                                                                                                                                                  Spread                                                                                                                                                                                                                                                                     0.6    Spread
                                                                                                                                                                                                                                                           0.6
                                                                                                                                                                                                                                                                  Av life                                                                                                                                                                                                                                                                    0.55   Av life
  100                                                                                                                                                                                                                                                                       100
                                                                                                                                                                                                                                                           0.55
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             0.5
                                                                                                                                                                                                                                                           0.5              50
  50
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             0.45
                                                                                                                                                                                                                                                           0.45
   0                                                                                                                                                                                                                                                       0.4                  0                                                                                                                                                                                                                                                            0.4
                                                                                                                                                                                                                                                                                    01/06/2007

                                                                                                                                                                                                                                                                                                 15/06/2007

                                                                                                                                                                                                                                                                                                              29/06/2007

                                                                                                                                                                                                                                                                                                                           13/07/2007

                                                                                                                                                                                                                                                                                                                                         27/07/2007

                                                                                                                                                                                                                                                                                                                                                         10/08/2007

                                                                                                                                                                                                                                                                                                                                                                        24/08/2007

                                                                                                                                                                                                                                                                                                                                                                                        07/09/2007

                                                                                                                                                                                                                                                                                                                                                                                                         21/09/2007

                                                                                                                                                                                                                                                                                                                                                                                                                          05/10/2007

                                                                                                                                                                                                                                                                                                                                                                                                                                            19/10/2007

                                                                                                                                                                                                                                                                                                                                                                                                                                                               02/11/2007

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  16/11/2007

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     30/11/2007

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         14/12/2007
        01/06/2007

                     15/06/2007

                                  29/06/2007

                                               13/07/2007

                                                             27/07/2007

                                                                            10/08/2007

                                                                                           24/08/2007

                                                                                                           07/09/2007

                                                                                                                           21/09/2007

                                                                                                                                           05/10/2007

                                                                                                                                                            19/10/2007

                                                                                                                                                                              02/11/2007

                                                                                                                                                                                                16/11/2007

                                                                                                                                                                                                                   30/11/2007

                                                                                                                                                                                                                                       14/12/2007




In terms of primary issuance, the market was definitely more active and less focused on CLO than it has been in the
last two weeks.

 Deal                                                                                                                                                                                           Sector                                                             Country
 TDA CAM 10                                                                                                                                                                                     RMBS                                                               Spain
 Amey Lagan Roads Financial                                                                                                                                                                     PPP                                                                UK
 Neptune CLO II                                                                                                                                                                                 CLO                                                                Spain
 Agricart Finance 4                                                                                                                                                                             Lease                                                              Italy
 Celtic Residential No. 13                                                                                                                                                                      RMBS                                                               Ireland
 Newgate Funding 2007-3                                                                                                                                                                         SPRMBS                                                             UK
 Candide financing 2007 NHG                                                                                                                                                                     RMBS                                                               Holland




19/12/2007                                                                                                                                                                                                                                                                  2
Markit Structured Finance Research




Finally a brief analysis of the actual UK RMBS market confirms that spreads are not tightening.


                                                                                      UK PRMBS vs UKSPRMBS                                                                                                                                                                                                                 UK PRMBS vs UKSPRMBS
  bps                                                                                                                                                                                                                                  bps

  140                                                                                                                                                                                                                                  250

  120
                                                                                                                                                                                                                                       200
  100
                                                                                                                                                                                                           United Kingdom PRMBS                                                                                                                                                                                                                 United Kingdom PRMBS
   80                                                                                                                                                                                                                                  150
                                                                                                                                                                                                           AAA Float (3-5)                                                                                                                                                                                                                      AA Float (3-5)

   60                                                                                                                                                                                                      United Kingdom SPRMBS                                                                                                                                                                                                                United Kingdom SPRMBS
                                                                                                                                                                                                           AAA Float (3-5)             100                                                                                                                                                                                                      AA Float (3-5)
   40
                                                                                                                                                                                                                                       50
   20

    0                                                                                                                                                                                                                                   0
        04/06/2007

                     18/06/2007

                                  02/07/2007

                                               16/07/2007

                                                            30/07/2007

                                                                         13/08/2007

                                                                                      27/08/2007

                                                                                                   10/09/2007

                                                                                                                24/09/2007

                                                                                                                             08/10/2007

                                                                                                                                          22/10/2007

                                                                                                                                                       05/11/2007

                                                                                                                                                                    19/11/2007

                                                                                                                                                                                 03/12/2007

                                                                                                                                                                                              17/12/2007




                                                                                                                                                                                                                                             04/06/2007

                                                                                                                                                                                                                                                          18/06/2007

                                                                                                                                                                                                                                                                       02/07/2007

                                                                                                                                                                                                                                                                                    16/07/2007

                                                                                                                                                                                                                                                                                                 30/07/2007

                                                                                                                                                                                                                                                                                                              13/08/2007

                                                                                                                                                                                                                                                                                                                           27/08/2007

                                                                                                                                                                                                                                                                                                                                        10/09/2007

                                                                                                                                                                                                                                                                                                                                                     24/09/2007

                                                                                                                                                                                                                                                                                                                                                                  08/10/2007

                                                                                                                                                                                                                                                                                                                                                                               22/10/2007

                                                                                                                                                                                                                                                                                                                                                                                            05/11/2007

                                                                                                                                                                                                                                                                                                                                                                                                         19/11/2007

                                                                                                                                                                                                                                                                                                                                                                                                                      03/12/2007

                                                                                                                                                                                                                                                                                                                                                                                                                                   17/12/2007
                                                                                      UK PRMBS vs UKSPRMBS                                                                                                                                                                                                                 UK PRMBS vs UKSPRMBS
                                                                                                                                                                                                                                       bps
  bps
  350                                                                                                                                                                                                                                  600

  300                                                                                                                                                                                                                                  500

  250                                                                                                                                                                                                                                  400
                                                                                                                                                                                                           United Kingdom PRMBS                                                                                                                                                                                                                 United Kingdom PRMBS
  200                                                                                                                                                                                                      A Float (3-5)                                                                                                                                                                                                                        BBB Float (3-5)
                                                                                                                                                                                                                                       300
  150                                                                                                                                                                                                      United Kingdom SPRMBS                                                                                                                                                                                                                United Kingdom SPRMBS
                                                                                                                                                                                                           A Float (3-5)                                                                                                                                                                                                                        BBB Float (3-5)
                                                                                                                                                                                                                                       200
  100

   50                                                                                                                                                                                                                                  100

    0                                                                                                                                                                                                                                   0
                                                                                                                                                                                                                                             04/06/2007

                                                                                                                                                                                                                                                          18/06/2007

                                                                                                                                                                                                                                                                       02/07/2007

                                                                                                                                                                                                                                                                                    16/07/2007

                                                                                                                                                                                                                                                                                                 30/07/2007

                                                                                                                                                                                                                                                                                                              13/08/2007

                                                                                                                                                                                                                                                                                                                           27/08/2007

                                                                                                                                                                                                                                                                                                                                        10/09/2007

                                                                                                                                                                                                                                                                                                                                                     24/09/2007

                                                                                                                                                                                                                                                                                                                                                                  08/10/2007

                                                                                                                                                                                                                                                                                                                                                                               22/10/2007

                                                                                                                                                                                                                                                                                                                                                                                            05/11/2007

                                                                                                                                                                                                                                                                                                                                                                                                         19/11/2007

                                                                                                                                                                                                                                                                                                                                                                                                                      03/12/2007

                                                                                                                                                                                                                                                                                                                                                                                                                                   17/12/2007
        04/06/2007

                     18/06/2007

                                  02/07/2007

                                               16/07/2007

                                                            30/07/2007

                                                                         13/08/2007

                                                                                      27/08/2007

                                                                                                   10/09/2007

                                                                                                                24/09/2007

                                                                                                                             08/10/2007

                                                                                                                                          22/10/2007

                                                                                                                                                       05/11/2007

                                                                                                                                                                    19/11/2007

                                                                                                                                                                                 03/12/2007

                                                                                                                                                                                              17/12/2007




The fact that CMBX-NA and ABX-HE have been improving for the last couple of weeks despite the accumulation of
bad news concerning this sector could be the proof that ABS investors are finally able to quantify the real risk related
to the underlying assets in the US.




19/12/2007                                                                                                                                                                                                                         3
Markit Structured Finance Research




In Europe, ABS spreads are still widening. This is because dealers are closing their books for the year-end and also
because of the tensions over the monetary market. There is a widespread belief that Europe will be impacted by
delinquencies in 2008. The real question is how big it will be. It is safe to say however that European delinquency will
not be as important as the US ones in percentage terms and that we should therefore expect an adjustment of our
spreads in comparison with the US ones at the beginning of 2008.




Philippe Pagnotta
ABS Analyst, Structured Finance
Markit
Tel: +44 20 7260 2214
Email: philippe.pagnotta@markit.com


For more information on Markit's ABS products, please contact: sfsales@markit.com




19/12/2007                                                 4

				
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