EABS_Market_20110520

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					                                                                                                                                                           Markit Structured Finance Research
                                                                                                                                                                                                                        20/05/2011



The European ABS Market
26 April 2011 – 20 May 2011

European ABS Pricing and Sectors

Resilient demand continues to be the order of the day in the European ABS market. The Greek turmoil,
compounded by the recent quandary that the IMF now finds itself in, has largely gone unnoticed. The rally
continues unabated with especially strong demand seen in the Prime UK and Dutch RMBS. The buying has also
been supported by a healthy supply in primary paper, all well received. In fact, most recently, FOSSM 2011-1 was
upsized to meet demand, with the final deal size reaching £3.75 million. Other new deals that came to market
included auto ABS from France (Titrisocram 2011-1) and Germany (Driver 9), as well as Dutch MBS XVI, which is
in the pipeline from NIBC, and BRASS 1, a UK RMBS announced yesterday by Yorkshire Building Society. Whilst
the month preceding the Global ABS conference traditionally has higher than usual issuance, this has,
nevertheless, been taken as a sign that we are marching along the road to the market’s recovery.

The market bellwether, GRANM has seen significant improvements across the stack compared to a month ago,
with AAAs up almost a point to 96.15/; AAs up by two points to 86.25/; As up at 77.75/ and BBBs least changed at
66.25/.

Other sectors of the secondary markets also continued to show strength. UK Non-conforming RMBS is still seeing
tightening spreads, and even peripheral RMBS has showed little weakness in the face of mixed news. Spanish,
Irish and Portuguese RMBS have seen price increases across senior and mezzanine tranches, with Greek
generally drifting sideways after a slight softening. In CMBS and, perhaps even more so, in CLO markets the
recovery has also been evident. The latter continues to see underlying loan prices increase and a steady decrease
in number of loans in default.

The general outlook appears to continue to be one of cautious optimism. Another boost to the ABS market was
seen in the call announcement of SCAN 1; with the private equity sponsor’s show of support for the deal further
validating ABS as a source of funding for non-banks.
                                European AAA RM BS (3-5yr WAL)                                                                                   European AA RM BS (3-5yr WAL)
      Spread (bps)                                                                                                       Spread (bps)
   1,600                                                                                                             3,200
                                                                      UK SPRMBS                     UK PRMBS
                                                                                                                                                                                                                  UK SPRMBS
   1,400                                                              Spani sh RMBS                 Dutch RMBS       2,800
                                                                      Ital i an RMBS                Ir i sh RMBS                                                                                                  UK PRMBS
   1,200                                                                                                             2,400
                                                                      Por tuguese RMBS              Fr ench RMBS                                                                                                  Spani sh RMBS
   1,000                                                                                                             2,000
                                                                      Austr al i an RMBS
                                                                                                                                                                                                                  Dutch RMBS
    800                                                                                                              1,600
    600                                                                                                              1,200
    400                                                                                                                800
    200                                                                                                                400
          0                                                                                                              0
       Jan-09       A pr-09   Jul-09   Oct-09   Jan-10   A pr-10   Jul-10       Oct-10     Jan-11       A pr-11          Jan-09 Apr-09        Jul-09    Oct-09    Jan-10   Apr-10    Jul-10    Oct-10         Jan-11   Apr-11
 Source: M arkit European ABS Pricing Service                                                                      Source: M arkit European ABS Pricing Service




                                   European A RM BS (3-5yr WAL)                                                                                 European BBB RM BS (3-5yr WAL)
              Spread (bps)                                                                                                Spread (bps)
 5,000                                                                                                               9,000
 4,500                                                                                                               8,000                                                                    UK SPRMBS            UK PRMBS
                                                                                           UK SPRMBS
 4,000                                                                                                               7,000
                                                                                           UK PRMBS
 3,500
                                                                                                                     6,000                                                                    Spani sh RMBS        Dutch RMBS
 3,000                                                                                     Spani sh RMBS
                                                                                                                     5,000
 2,500                                                                                     Dutch RMBS
                                                                                                                     4,000
 2,000
  1,500                                                                                                              3,000

  1,000                                                                                                              2,000
   500                                                                                                               1,000
      0                                                                                                                  0
     Jan-09        A pr-09    Jul-09   Oct-09   Jan-10   A pr-10   Jul-10      Oct-10      Jan-11       A pr-11          Jan-09    A pr-09    Jul-09    Oct-09    Jan-10   A pr-10   Jul-10    Oct-10         Jan-11   A pr-11
 Source: M arkit European ABS Pricing Service                                                                      Source: M arkit European ABS Pricing Service
Markit Structured Finance Research



                                                   CM BS (3-5 yr WAL)                                                                                                                             UK RM BS AAA
            Spread (bps)                                                                                                                     Spread (bps)                                                                                               Cash Price (%)
                                                                                           CMBSAAA
    7,000                                                                                                                               1,000                                                                                                                      100
                                                                                           CMBSAA
                                                                                           CMBSA                                          900                                                                                                                      90
    6,000
                                                                                           CMBSBBB
                                                                                                                                          800                                                                                                                      80
                                                                                           Mar ki t CMBX.NA.AAA Indi ces-S3
    5,000                                                                                                                                 700                                                                              Holmes Mast er Issuer PLC 2006 1        70
                                                                                           Mar ki t CMBX.NA.BBB Indi ces-S3
                                                                                                                                                                                                                           3 A2 EUR Spread
    4,000                                                                                                                                 600                                                                                                                      60
                                                                                                                                                                                                                           Perm Mast er Issuer plc 2007 1
                                                                                                                                          500                                                                              2007- 13A EUR Spr ead                   50
    3,000                                                                                                                                                                                                                  Granit e Mast er Issuer plc 2007- 2
                                                                                                                                          400                                                                                                                      40
                                                                                                                                                                                                                           3A2 EUR Cash Price
    2,000                                                                                                                                 300                                                                              Aire Vy Mt gs 2005 1plc 2 A2 EUR        30
                                                                                                                                          200                                                                              Cash Price                              20
    1,000
                                                                                                                                          100                                                                                                                      10
         0                                                                                                                                  0                                                                                                                      0
         Jan-09 Apr-09          Jul-09          Oct-09     Jan-10    Apr-10    Jul-10   Oct-10        Jan-11           Apr-11               Jan-09 Apr-09             Jul-09         Oct-09        Jan-10    Apr-10   Jul-10 Oct-1      0 Jan-1 Apr-1 1        1
 Source: M arkit European ABS Pricing Service                                                                                         Source: M arkit European ABS Pricing Service




                         European Auto Loan/ Equipment Lease ABS                                                                                                                    European Credit Card ABS
       Spread (bps)                                                                        Auto Loan AAA (1-4 yr s)                         Spread (bps)
   3,200                                                                                   Auto Lease AAA (1-4 yr s)                    3,600
                                                                                           Equi p Lease AAA (1-4 yr s)
   2,800                                                                                                                                3,200                                                                                       Cr edi t Car d AAA (1-4 yr s)
                                                                                           Auto Lease A (1-4 yr s)
                                                                                           Auto Loan BBB (1-4 yr s)                     2,800                                                                                       Cr edi t Car d A (1-4 yr s)
   2,400
                                                                                           Equi p Lease BBB (1-4 yr s)                                                                                                              Cr edi t Car d BBB (1-4 yr s)
                                                                                                                                        2,400
   2,000
                                                                                                                                        2,000
    1,600
                                                                                                                                         1,600
    1,200
                                                                                                                                         1,200
     800                                                                                                                                     800
     400                                                                                                                                     400
         0                                                                                                                                    0
         Jan-09 Apr-09          Jul-09      Oct-09       Jan-10      Apr-10    Jul-10   Oct-10        Jan-11           Apr-11                 Jan-09 Apr-09            Jul-09            Oct-09    Jan-10    Apr-10    Jul-10     Oct-10          Jan-11            Apr-11
 Source: M arkit European ABS Pricing Service                                                                                         Source: M arkit European ABS Pricing Service



ECB continues their push for more transparency in deal reporting, with CMBS now in the spotlight. In order to be
eligible for ECBs Repo programmes, transactions will need to have loan-by-loan collateral information made
available at least quarterly and within a month of the period’s bond payment date. It is expected to take 18 months
to implement, and is yet another welcome development on the road to better transparency and standardisation of
reporting (CREFC’s template was adopted by the ECB) in European ABS market. It should make CMBS as an
asset-class more attractive to investors, in turn improving liquidity in the sector.

European Total Return
The total return figures continue to move upwards, reflective of the rally, with even the peripherals seeing
improvement.

                                         AA A T ot al Return Oct 2007                                                                                                         A A A T o tal R eturn Oct 2007
    1
   15                                                                                                                                 135
    1
   10
                                                                                                                                      125
  105
                                                                                                                                        1
                                                                                                                                       15
  100
   95                                                                                                                                 105
                      UK PRMBSAAA
   90                                                                                                                                  95             UK CMBSAAA
                      Dutch RMBS AAA
   85
                                                                                                                                                      Gr ani te Master Issuer 07-1 3A2
                                                                                                                                       85
   80                 Spani sh RMBSAAA
                                                                                                                                                      UK SPRMBSAAA
   75                 Gl obal Eur opean ABSAAA                                                                                         75
                                                                                                                                                      Gl obal Eur opean CMBSAAA
   70                                                                                                                                  65
     Oct -07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-0 9                      Oct-09   Feb-10   Jun-10    Oct-10         Feb -11                 Oct-07    Feb-0 8    Jun-0 8      Oct-08         Feb-09    Jun-09   Oct-09   Feb-10    Jun-10     Oct-10          Feb-11
 Source: M arkit European To tal Return Analysis Service                                                                            Source: M arkit European Total Ret urn A nalysis Service



                                         BB B T ot al Return Oct 2007                                                                                                          B B B T o tal R et urn Oct 2007

   120
                                                                                                                                        1
                                                                                                                                       10
    1
   10
   100                                                                                                                                 95
    90
                                                                                                                                       80
    80
    70                                                                                                                                 65
    60               UK PRMBSBBB
                                                                                                                                       50
    50               Dutch RMBSBBB
    40                                                                                                                                 35               Gr anite Master Issuer 07-1 3C1
                     Spanish RMBSBBB
    30                                                                                                                                                  UK SPRMBSBBB
                                                                                                                                       20
    20               Global Eur opean ABS BBB
                                                                                                                                                        Global Eur opean CMBSBBB
    10                                                                                                                                   5
      Oct -07   Feb-08    Jun-08     Oct-08       Feb-09    Jun-09    Oct-09   Feb-10   Jun-10     Oct-10        Feb-11                  Oct-07    Feb-0 8    Jun-08       Oct -0 8       Feb-09    Jun-09   Oct-09   Feb-10    Jun-10      Oct-10          Feb-11
 Source: M arkit European To tal Return Analysis Service                                                                            Source: M arkit European To tal Ret urn A nalysis Service


20/05/2011                                                                                                                      2
Markit Structured Finance Research




                                        A A A T o tal R eturn Jan 2009                                                                                 A AA T o tal R et urn Jan 2009

   130                UK PRMBSAAA
                                                                                                                                UK CMBSAAA
                                                                                                              170
                      Dutch RMBSAAA
   125                                                                                                                          Gr anit e Mast er I ssuer 07-1 3A2
                      Spanish RMBSAAA
                                                                                                              160
   120                                                                                                        150               UK SPRMBSAAA
                      Global Eur opean ABSAAA

    15
    1                                                                                                         140               Global Eur opean CMBSAAA
                      I r ish RMBSAAA

    1
    10                                                                                                        130
                                                                                                              120
   105
                                                                                                               1
                                                                                                               10
   100
                                                                                                              100
    95                                                                                                         90
    90                                                                                                         80
     Jan-09     Apr-09      Jul-09       Oct-09   Jan-10   Apr-10   Jul-10   Oct-10   Jan-11   Apr-11           Jan-09     Apr-09         Jul-09         Oct-09            Jan-10   Apr-10   Jul-10       Oct-10   Jan-11   Apr-11
 Source: M arkit European Total Return A nalysis Service                                                    Source: M arkit European Total Ret urn A nalysis Service



                                        B B B T o tal R eturn Jan 2009                                                                                  B B B To t al Return Jan 2009

   240                                                                                                        450
   220                 UK PRMBSBBB                                                                            400                        Gr anite Master Issuer 07-1 3C1

   200                 Dut ch RMBSBBB
                                                                                                              350
    180                Spanish RMBSBBB                                                                                                   UK SPRMBSBBB
                                                                                                              300
    160                Global Eur opean ABSBBB
                                                                                                              250                        Gl obal Eur opean CMBSBBB
    140                Ir ish RMBSBBB
                                                                                                              200
    120
                                                                                                               150
    100
    80                                                                                                         100
    60                                                                                                          50
    40                                                                                                            0
     Jan-09     Apr-09       Jul-09      Oct-09   Jan-10   Apr-10   Jul-10   Oct-10   Jan-11   Apr-11             Jan-09    Apr-09         Jul-09         Oct-09           Jan-10   Apr-10   Jul-10       Oct-10   Jan-11   Apr-11
 Source: M arkit European Total Return A nalysis Service                                                    Source: M arkit European Tot al Return A nalysis Service




Primary Market and Rating Actions

As already mentioned the primary issuance has picked and so far continues to be well received. All Fosse 2011-1
tranches are trading above par on their first day. The issuance was also upsized to accommodate stronger than
expected demand. Titrisocram 2011-1 (French Auto Loans deal) was well received, along with Driver 9, which is
reportedly oversubscribed. The recently announced Driver España, despite the country of collateral, is likely to
receive investors’ interest. It will be the first publicly placed Spanish Auto Loan transaction from VW since 2007. On
top of that there is talk of a UK CMBS (Deco 2011-CSPK from Deutsche) which would also be a first since the crisis.
So the pipeline remains strong with NIBC’s Dutch MBS XVI and Yorkshire’s Brass 1 in the works.

Primary Market (Source: Markit European ABS Performance)
Deal                                                                Country/Sector                            Class                      Av Rating                          Spread (bp)                     Amount (€ mn)
Swedish Consumer Credit No.1                                        Swedish/Consumer Loans                    A                      AAA                                     1mSTIBOR+200                                   2124.0
                                                                                                              B                      AA                                      1mSTIBOR+300                                     233.0
                                                                                                              C                      BBB                                     1mSTIBOR+500                                     233.0
                                                                                                              D                      -                                                  -                                     129.0
BAA Funding TA                                                      UK/Whole Business                         A                      A                                        UKT 1.125+210                                   147.9
Titrisocram 2011-1                                                  French/Auto Loan                          A                      AAA                                                 1mE+95                               409.5
                                                                                                              B                      -                                                                -                         40.5
Fosse 2011-1                                                        UK/Prime RMBS                             A1                     P-1/A1+/F1+                                                                             352.8
                                                                                                              A2                     AAA                                               3mL+140                              2116.7
                                                                                                              A3                     AAA                                               3mL+140                                572.3
                                                                                                              A4                     AAA                                               3mE+130                                500.0
                                                                                                              A5                     AAA                                               3mL+150                                194.0
                                                                                                              A6                     AAA                                               3mL+150                                286.2
                                                                                                              A7                     AAA                                               3mE+140                                275.0
Driver 9                                                            German/Auto Loans                         A                      AAA                                                1mE+60                                690.0
                                                                                                              B                      A+                                                1mE+145                                 24.4




20/05/2011                                                                                              3
 Markit Structured Finance Research




 Rating actions are once again dominated by downgrades, mostly resulting from Greek sovereign downgrade, which
 has led to a swathe of deals’ ratings cut. Also a few CMBS have seen their senior notes downgraded as concerns
 remain over the state of the commercial property markets as well as the potential refinancing issues that still loom
 large for many loans. Aforementioned positive credit trends in the leveraged loans space have led to a few CLOs
 receiving upgrades.

Deals Affected by Rating Actions (Source: Markit European ABS Performance)
Deal                                                                         Country/Sector               Action
Anaptyxi 2006-1 PLC A, B                                                     Greek/SME CLO           Downgraded
Asti Finance S.r.l B, C                                                      Italian/RMBS              Upgraded
Axia Finance PLC A                                                           Greek/SME CLO           Downgraded
AyT Hipotecario Mixto V A, B, C,                                             Spanish/RMBS            Downgraded
BBVA RMBS 4 A1, A2, A3; 5 A                                                  Spanish/RMBS              Upgraded
Byzantium Finance PLC A, B, C; Byzantium II A                                Greek/RMBS              Downgraded
Chaves SME CLO 1 A, B                                                        Portuguese/SME CLO      Downgraded
Cornerstone Titan 2007-1 plc A2, B, C, D                                     European/CMBS           Downgraded
Daneion 2007-1 PLC A                                                         Greek/Consumer Loan     Downgraded
DECO 10-Pan Europe 4 A1, A2, X                                               European/CMBS           Downgraded
DECO 11 - UK 3 A1A, A1B                                                      UK/CMBS                 Downgraded
DECO 12 - UK 4 A1, A2                                                        UK/CMBS                 Downgraded
DECO 14 - Pan Europe 5, A-1, A-2, A-3, X                                     European/CMBS           Downgraded
DECO 17 - Pan Europe 7 A1, A2, B, X                                          Greek/RMBS              Downgraded
DECO 8 - UK 2 A1, A2                                                         UK/CMBS                 Downgraded
DECO 9 - Pan Europe 3 A1, A2, B, X                                           European/CMBS           Downgraded
ELOC 21 (Odysseus) A, X                                                      European/CMBS           Downgraded
Epihiro A                                                                    Greek/SME CLO           Downgraded
Equinox (Eclipse 2006-1) A                                                   UK/CMBS                 Downgraded
Estia Mortgage Finance PLC A, B, C; II A, B;                                 Greek/RMBS              Downgraded
Eurohome (Italy) Mortgages S.r.l A                                           Italian/RMBS            Downgraded
First Flexible 4 B                                                           UK/BTL RMBS               Upgraded
Globaldrive 2008-B B, C                                                      French/Auto Loan          Upgraded
Grifonas Finance 1 A, B, C                                                   Greek/RMBS              Downgraded
HIPOTECARIO MIXTO V A, B, C                                                  Spanish/RMBS            Downgraded
Hudson CLO 1 A-1R, A-1E, A-2, A-3, B-1, B-2                                  CLO                       Upgraded
Irida PLC                                                                    Greek/Lease ABS         Downgraded
KATANALOTIKA PLC A                                                           Greek/Auto Loan         Downgraded
Kion Mortgage Finance PLC A, B, C; 2 A                                       Greek/RMBS              Downgraded
Lithos Mortgage Financing PLC A, B, C                                        Greek/RMBS              Downgraded
Mesdag (Charlie) E                                                           Dutch/CMBS              Downgraded
NEMUS 2006-1 A                                                               UK/CMBS                 Downgraded
Opera MetroCentre A, B                                                       UK/CMBS                 Downgraded
OPERA Scottish Retail                                                        UK/CMBS                 Downgraded
Pisti 2010-1 PLC A                                                           Greek/Credit Cards      Downgraded
Praxis I Finance A; II A                                                     Greek/SME CLO           Downgraded
Revolver 2008-1 PLC A                                                        Greek/Consumer Loan     Downgraded
Sanpaolo Leasint B                                                           Italian/Lease ABS         Upgraded
Skye CLO I B, C, D, E                                                        CLO                       Upgraded
Synergatis A                                                                 Greek/SME CLO           Downgraded
Talisman 7 Finance A, X                                                      German/CMBS             Downgraded
TDA 30 A, B, C                                                               Spanish/RMBS            Downgraded
TDA Pastor Consumo 1 A, B, C                                                 Spanish/Consumer Loan   Downgraded
Themeleion II A, B, C; III A, M, B; IV A                                     Greek/RMBS              Downgraded
Titan Europe 2006-3 A, B, C, D                                               European/CMBS           Downgraded
UCI 14 A, B, C; 15 A, B, C; 16 A2, B, C, E; 17 A2, B, D                      Spanish/RMBS            Downgraded




 20/05/2011                                                         4
Markit Structured Finance Research




Economics Data
On the macro-economic side the picture remains mixed. The recovery proceeds at a slow pace and inflation
definitely remains a major concern, with latest UK figures once again exceeding expectations (4.5% as opposed to
4.1%). This increase puts further pressure on the BoE, which continues to resist rate rises, and is complicated
further by the lower unemployment figures. Although the latter is considered by some to be a short term effect, in
part driven by changes in benefit structures. On a positive note the Eurozone economic growth figures surprised on
the upside (0.8% as opposed to the expected 0.5%), with not only Germany and France but also Spain and even
Greece posting positive figures.

PMI housing                                                  House P rices                  Halifax HPI (annual %) chg)        PMI housing index                                      House P rices     Nationwide HPI (annual %) chg)
80                                                                                                                   35        80                                                                                                   35

70                                                                                                                  25          70                                                                                                 25

60                                                                                                                  15          60                                                                                                 15

50                                                                                                                  5           50                                                                                                 5
40                                                                                                                  -5          40                                                                                                 -5
                               UK Constr ucti on PMI Housi ng Acti vi ty Index                                                                        UK Constr ucti on PMI Housi ng Acti vi ty Index

30                                                                                                                  -15         30                                                                                                 -15
                                                                                                                                                      Nati onwi de house pr i ce i ndex, al l houses
                               Hal i f ax house pr i ce i ndex, al l houses
20                                                                                                                  -25         20                                                                                                 -25

 10                                                                     -35                                                      10                                                                     -35
   1998 1                                                         0
         999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201 2011                                                            1998 1                                                         0
                                                                                                                                         999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201 2011
 Source: M arkit Economics, Halif ax                                                                                           Source: M arkit Economics, Nat ionwide




The UK house price indices continue to show a market in stagnation. April’s indices both showed declines, with
month-on-month changes of -1.4% from Halifax and -0.2% from Nationwide. It is no surprise that the market
continues its sideways drift, with uncertainty prevailing around the future of the fragile economic recovery. Given
the higher than expected inflation figures, rate hikes are once again at the top of the agenda. The Markit/CIPS UK
Construction PMI has also pointed to a slowdown in market activity, with a drop to 53.3 from 56.4 in April. Perhaps
more telling, the Housing activity sub-index dropped sharply from 57.1 to 48.1 (below 50 implies expectations of a
contraction). Obviously one month’s figure does not make for a trend but it does seem to be indicative of the topsy-
turvy times ahead for the UK housing market.

                           Monthly Gross Lending Secured on Dw elling
         £ millions
                                                                                                                  15,000



                                                                                                                  13,000


                                                                                                                  11,000



                    Seasonally Adjusted                                                                           9,000

                    Not Seasonally Adjusted

                                                                                                                  7,000
  Mar-09        Jun-09         Sep-09             Dec-09              Mar-10     Jun-10   Sep-10   Dec-10    Mar-11
     Source: Bank of England




According to the Bank of England the gross, seasonally unadjusted, lending secured on dwellings is up significantly
on the previous month, but the seasonally adjusted figure tells a different story. It is down for the third month in a
row and is lower than at the same time last year.

Philippe Pagnotta                                                                                                                     Roman Kalyuzhny
Director, Structured Finance                                                                                                          Vice President, Structured Finance
Markit                                                                                                                                Markit
Tel: +44 20 7260 2214                                                                                                                 Tel: +44 20 7260 2203
Email: philippe.pagnotta@markit.com                                                                                                   Email: roman.kalyuzhny@markit.com
For more information on Markit's ABS products, please contact: sfsales@markit.com
20/05/2011                                                                                                                 5
Markit Structured Finance Research




20/05/2011                           6

				
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