Capital Relief Trades
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Pricing flurry
European ABS/MBS market update
Yesterday saw five new European ABS/MBS price in one of the busiest days the primary market has seen this year. However, volumes are still short of pre-Covid levels.
Despite the flurry of deals yesterday, paper throughout the stack saw strong demand. Indeed every offered tranche priced inside initial price talk.
“Across European ABS/MBS, sentiment has been pretty positive for .......
News 18 June 2021
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AutoNoria returns
BNP Paribas draws crowd
BNP Paribas has arranged a €1bn full-stack significant risk transfer transaction for Banco Cetelem. Dubbed AutoNoria Spain 2021, the Spanish auto SRT is the first post-Covid capital relief trade from the AutoNoria programme and attracted one of the largest order books for Spanish auto ABS following the 2008 financial crisis at over €2bn.
Rated by Fitch and Moody’s, .......
News 18 June 2021
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Triple-starred first for BMO
BMO brings innovative C$ CRT trade referencing Canadian CRE
A groundbreaking Canadian dollar denominated regulatory capital relief trade from Bank of Montreal (BMO) closed earlier today (June 15), say well-placed market sources.
Not only does the deal constitute the first Canadian dollar CRT trade, it will also be the first to reference a pool of Canadian commercial real estate (CRE) loans.
In another debut feature, the deal possesses a hybrid structure, incorporating .......
News 15 June 2021
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Super narrow Arch prices
New Bellemeade comes at spreads well inside previous CRT trade
Arch Capital has priced its latest Bellemeade CRT transaction at levels significantly tighter than the last such deal in March, and to a more broadly syndicated pool of investors than ever before, confirms evp, alternative markets Jim Bennison.
The deal, designated Bellemeade 2021-2, consisted of five tranches for a total value of $522.8m. In addition, $93m was placed in the reinsurance market, .......
News 14 June 2021
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Execution queries
Questions linger over funded insurer SRTs
Originators of significant risk transfer transactions have welcomed the trio of innovative funded insurer trades from Credit Risk Transfer Solutions (SCI 27 May). Even though all three deals were successfully executed, questions have been raised about the potential cost and pricing of future transactions, however.
CRTS’s deals are generally mezzanine trades and involve an investment platform managed by the broker .......
News Analysis 11 June 2021
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Arch markets MILN
Second Bellemeade deal of 2021 in the market, pricing soon
Arch is currently in the market its second mortgage insurance-linked note (MILN) of the year, and the trade is expected to price tomorrow or Friday, say sources.
The transaction, dubbed Bellemeade Re 2021-2, should close next week or the week after.
Overall deal size is expected to be around $500m, and it will consist of five tranches: the M-1A M-1B, M-1C, .......
News 9 June 2021
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Positive prospects
Rating upgrades boost default outlook
The number of ‘weakest links’ – issuers rated single-B-minus or lower with negative outlooks or ratings on credit watch with negative implications – decreased to 353 as of 30 April 2021 and is nearing pre-pandemic levels of 282, according to a new report from S&P. Indeed, accommodative financing and an economic recovery contributed to an increase in positive rating .......
News 9 June 2021
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Pandemic hedges
CRT solutions for pandemic events mulled
Munich Re’s Epidemic Risk Solutions (ERS) unit is targeting credit risk transfer solutions that incorporate pandemic events, although the initiative remains in its early stages and coverage will for now amount to only an economic hedge without capital benefit.
The latter is currently not available to banks under existing Basel rules, but this could change as the ESG agenda across credit markets .......
News 4 June 2021
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Capital cushions
Buoyant CET1 levels explain CRT reluctance
Dealers agree that this year has been quieter in the CRT market in USA and Canada than had been anticipated - with the honourable exception of the ground-breaking Texas Capital Bank deal in March.
“It is a very strange time. It feels like a lot of banks are on the sidelines,” says a source in the US.
The renaissance of the North .......
News Analysis 3 June 2021
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FHFA under fire
Arch takes aim at FHFA report on GSE CRT
David Gansberg, president and ceo of Arch Mortgage Insurance, has taken serious issue with the recent Federal Home Financing Authority (FHFA)’s report on the GSE CRT programme, published last month.
Writing in Housing Wire last week, Gansberg accuses the FHFA of missing out vital evidence on the CRT scheme to present a distorted picture of its efficacy.
The FHFA report, titled Performance of .......
News 3 June 2021
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Canuck rumours
Canadian banks said to be circling CRT
Rumours continue to swirl about the possibility of an imminent regulatory capital relief trade issued by a Canadian bank.
In January, there were strong rumours that a CRT trade was in the offing in the near future, probably from Scotia. These rumours have recently resurfaced, though as yet nothing has come to light. It was thought originally that Scotia would issue .......
News 3 June 2021
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Risk transfer round up-3 June
CRT sector developments and deal news
Sabadell is believed to be prepping a capital relief trade backed by SME loans that is expected to close in 3Q21. The bank’s last significant risk transfer trade was finalized in June 2020 (see SCI’s capital relief trades database).
....... News 3 June 2021
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ETL waiver requested following cyberattack
Sector developments and company hires
ETL waiver requested following cyberattack
Market Moves 28 May 2021
European truck lease provider Fraikin SAS was subject to a ransomware attack that started on 11 May. S&P notes that the credit quality of its two securitisations - FCT Eurotruck Lease II and FCT Eurotruck Lease III (ETL II and III) - is unlikely to be affected, providing the company can make a swift return .......
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End of the line?
SRT issuers mull dropping synthetic excess spread
The requirement to fully capitalise synthetic excess spread is expected to result in SRT issuers dropping the feature from their transactions. This CRT Premium Content article weighs the relative benefits of synthetic securitisations versus those of full-stack cash deals, in which originators can use excess spread.
The EBA and the European Commission’s decision last year to fully capitalise synthetic ......
News Analysis 28 May 2021Premium Content
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CRT return for FNMA?
Supreme Court ruling on Calabria's future imminent
A US Supreme Court decision about whether President Biden can remove Mark Calabria as director of the Federal Housing Finance Authority (FHFA) may arrive as soon as next week, say well-placed sources.
Following recent precedent, it seems likely that the court will rule that Calabria can be removed by the executive ‘for cause’. This will have profound ramifications .......
News Analysis 27 May 2021
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Landmark SRTs finalised
Cash collateralised insurer deals debut
Credit Risk Transfer Solutions (CRTS) has executed three synthetic securitisations that have broken new ground in the market. Indeed, the firm has structured the first cash collateralised capital relief trades that involve insurer counterparties.
According to Andy Garston, director at CRTS: ‘’Most SRT deals require cash investors, which is problematic for insurers. But we now have a structure .......
News Analysis 27 May 2021
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Missed opportunity
ESA report disappoints on securitisation treatment
The recent European Supervisory Authorities (ESA) report on the implementation and functioning of the EU Securitisation Regulation (SCI 17 May) disappointed many in the industry, since it avoided tackling long-standing issues in the treatment of securitisations. In particular, the lack of a level playing field in terms of disclosure and due diligence remains a concern.
The ESA .......
News Analysis 27 May 2021
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Actuarial approach
Alphidem co-founder Ken Sutter outlines how the quantitative...
In light of the current regulatory and interest rate environment, it could be assumed that capital relief trades enjoy great popularity, even outside of the dedicated investor community. However, despite growth and positive market trends, the asset class still leads a niche existence and sticks to its esoteric label. This is even more astonishing considering that many alternative credit managers .......
Talking Point 25 May 2021