Repo Lines Concealing Open-Market Growth

Support from central banks in Europe is still distorting worldwide securitization volume, but this time in a different direction.

According to preliminary figures from Asset-Backed Alert's ABS Database, issuers around the world placed some $120 billion of new asset-backed bonds, collateralized debt obligations and residential and commercial mortgage securities during the first three months of this year. That's a decrease of about 40% from the year-ago tally of $203.4 billion.

The reason for the drop: Fewer issuers are retaining deals for use in European Central Bank and Bank of England repurchase facilities. Those programs had inflated new-deal volume in recent years as liquidity-strapped financial institutions tapped them as an outlet for massive amounts of loans. Now, declining use of the repo facilities has led to an exaggerated contraction in issuance totals.

The pullback is partly attributable to efforts by the European Central Bank and Bank of England to scale back their repo support. It also reflects the fact that open-market conditions are far better than they were a year ago, when the global credit industry was paralyzed.

Indeed, when deals retained for government-repo purposes are excluded, the year-to-date total would be around $50 billion - an increase of almost 60% from the March 2009 mark of $29.9 billion. Put another way, about 40% of this year's securitizations have been distributed among private-market sellers, compared to about 15% a year ago.

As they were a year ago, the European Central Bank and Bank of England repo lines are also shaping underwriter league tables. When transactions filtered through the programs are included, ING would be the world's busiest securitization bookrunner for the first three months of this year. But that's only because the bank led the largest securitization ever completed, a $37.1 billion Dutch-mortgage deal that it kept for a European Central Bank facility. Bank of America, Barclays, Credit Suisse and RBS follow, each with about $9 billion of deals.

If such transactions aren't counted, however, Credit Suisse would place first with more than $8 billion of assignments. It would be followed by BofA. Deutsche Bank, Morgan Stanley and RBS also would be positioned for top-five slots. ING would have zero league-table credit.

Asset-Backed Alert will publish its final first-quarter underwriter rankings on April 2.

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