Thanks again for reading Freshly Squeezed ABS. We’re trying something new this week, coming to you right after a long weekend. The switch to the start of the week is in part due to the sheer volume of supply that hit screens: Nine deals were priced and two more were announced last week.

In fact, there were so many deals that I’ve had to create a more compact deal table to save you from seemingly infinite scrolling!

Any semblance of caution has disappeared and the message from investors is clear: “We’re here and we’ve got cash to burn”.  

However, there was another reason for my delayed publication. With news that the US could impose a 50% tariff on the EU, this newsletter could have been out of date by Friday afternoon.  

Thankfully, it seems that talk has died down, but it is perhaps a reminder of how quickly the landscape can change.  

As I write at the end of the newsletter, the technicals are strong enough to keep spreads grinding tighter throughout the year, it just depends on the outside noise whether that happens or not.  

Euros Firing

Euros was where most of the action took place, six deals priced in total with two of those pre-placed. The real standout feature was the impressive coverage levels across all four marketed transactions.  

The two auto trades came from Volkswagen, with its bellwether €1bn VCL 45 and the slightly more exotic, Italian auto from Stellantis – the €1bn Italian Auto Loans Stella Series.

Such was the strength of VCL 45 that it managed a late €250m upsize on the initial €750m, while despite such a large amount of AAA paper to be sold, they were still able to tighten the seniors from high 50bps to 53bps and attract books of 1.8x covered  

Stellantis meanwhile, offered a full cap-stack. The Class A’s were split into two €442.5m chunks (one marketed, one pre-placed), which duly tightened in around 9bps to 73bps over 1-month Euribor. The rest of the structure tightened steadily rather than drastically, but the coverage levels were a sign of just how strong demand is right now. From Classes A-D, coverage was 2.6x, 3.6x, 6.1x and 8.4x, respectively. All with enough time to find a little upsize as well.  

And it was a similar story for BBVA’s Consumer ABS, the €2.35bn BBVA Consumer 2025-1, although only €740m was offered to investors.  

The €410.5m offered part of the Class A’s came in by 7bps to land at 73bps over 3-month Euribor. And coverage was super strong. Classes A-E were 2.4x, 2.6x, 3.7x, 2.1x and 5x covered, respectively. It’s all the more impressive as the mezz and junior notes totaled €350m.  

At the more esoteric end of the market, the €720m debut European data center deal from Vantage Data Centers also did well, tightening its offered Class A-2s (rated single A-), down from low-mid 200s to 205bps.  

Some may quibble about whether fixed-rate, secured green bond tranches equate to securitization in the truest sense, but data centers is a fledgling asset class, so let’s be kind. As I mentioned last time, it’s nothing more than to keep those investors more familiar with the US market happy.

UK Prime Returns

The UK was not quite the whirlwind of Europe, but still saw some more supply off the back of a good couple of weeks.  

There was a welcome return of some UK Prime RMBS as well. Leeds Building Society’s £350m Albion No.7 is the first UK Prime since March 19 (that was Aldermore’s Oak No.5). Leeds are not quite as Prime as your Lloyds or Santander but with a smaller issue size and cautious IPTs, it seems they picked the perfect moment for a strong result.  

The £350m Class A’s (the only tranche on offer) started at mid-high 50s, but with investors hungry for Prime paper for over two months, that came in rapidly, eventually landing at 50bps over Sonia. To put into context just how good that is, only Virgin’s Lanark has priced tighter (at 47bps) in the past 12 months.  

Naturally then, you’ll be shocked to hear the books were 3.2x covered. That’ll do, as they say in Yorkshire.

Then last but certainly not least to Vida Bank’s “debut” BTL RMBS, the £250m London Bridge Mortgages 2025-1. I kept an eye on this one and it certainly didn’t disappoint.  

Strong demand across the stack, but the Class A’s finished at 78bps over Sonia to claim the tightest non-prime print of 2025 in sterling. Once again, coverage was strong – Classes A-C at 2.9x, 3.9x and 3.1x, respectively.  

I took a closer look at UK BTL RMBS, and it’s a great example of just how strong technicals are right now. The graph below (made on Concept ABS) shows AAA spreads from all UK BTL RMBS (of varying maturities) since January 2020.  

With Vida Bank’s 78bps over Sonia, we are now just 13bps shy of 2021 tights, which were fuelled by Covid-related stimulus packages.  

When we consider that supply so far this year is not at 2024 pace, plus the super strong investor demand, there’s no reason to think that this trend tighter will stop. As we head to Barcelona and the quieter summer months, the idea that there will be so much issuance between now and September that investors will start pushing back seems fanciful.

It wouldn’t be surprising to see it continue beyond September too.  

But as we saw this weekend, the only things holding this market back are macroeconomic/geopolitical forces. If something material were to happen there, then the equation could change drastically.  

But even with a fair bit of macro volatility this weekend, it feels like little has changed (yet).  

I think this also goes back to a chat I had a few weeks ago, where a friend argued that the world (and the European ABS market) is becoming accustomed to the noises. And as a result, many won’t blink until something truly irreversible happens.  

Let’s see how this week pans out – Bank of Ireland’s debut UK Prime RMBS, Bowbell Master Issuer 2025-1, will likely provide the clearest indication of market sentiment.  

Final Word

Ahhh, I played 36 holes on Sunday, having had two matches to play. Brutal. Won my first 3&1 and was 2up with three to play standing on my 34th tee, thinking what a great day I was having… I then managed to snatch defeat from the jaws of victory, losing the 16th, 17th and 18th.  

Anyway!  

Arsenal Women won the Champions League though… that’s better than a Europa League just FYI.  

I remember growing up aware of Arsenal Women’s dominance in the early 2000’s (although it was nigh-on impossible to watch on TV) and it’s a great source of pride for Arsenal fans that the club has been the trailblazer in terms of promoting women’s football in the UK. Great to see more girls watching and enjoying the sport, inspired by the new generation of Gunners.

Have a great week

Tom

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