Are investors just full?

Good afternoon from Amsterdam. I’m heading to the Outvie Dutch Securitisation Conference tomorrow for what looks set to be a great event. In preparation for that I spoke to Barend Van Drooge on the Freshly Squeezed Podcast – so please do have a listen, here.

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But what of last week? Well, deal flow is still very strong with nine deals pricing in euros and sterling, although one was pre-placed by Together and another was retained by Nationwide. But demand on the senior part of the capital stack looks be a bit of a slog, particularly in euros and the high-flying asset class of Auto ABS, which makes one question if investors are finally just full?

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We’ve seen numerous cases now where the well-worn tactic of starting with very generous IPTs is not helping leads build momentum. Instead, books have been barely covered on the Class As, making it very difficult to tighten.

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Tommi 7, the well-known Finnish Auto ABS from LocalTapiola, was perhaps the first example of a strategy change from the leads. IPTs were at 60bps over 1-month Euribor, which offered a 6bps pickup versus Tommi 6 of February 2025 and 3bps pickup on Kimi 14 from November. But 1.1x coverage was all the leads could muster, which suggests 60bps was actually an aggressive start under the circumstances, and the Tommi leads knew they just had to get going and get out of there with oil prices rising above $110 as the week wore on.

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Of course, the war in Iran is still a major concern for the capital markets, and with no end to the conflict in sight, the impact on European economies will start to come through in government bond prices and inflation fears as it has already for UK Gilts this month.

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Euro asset classes offering something a little different are getting away okay in general, although the market has undoubtedly widened a few bps since the start of the war.

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Credit Agricole’s French RMBS Habitat managed to get books covered up to 2.2x and priced just 3bps wide of its most recent comparator, BPCE’s Olympia trade in February. Austrian auto collateral from Porsche also got away without any hiccups.

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In sterling, the technical factors are less powerful. Unlike euros, 2025 issuance was poor with €24.9bn (equivalent) placed with investors, €9bn fewer than the record in 2024, according to Concept ABS data.

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As a result, demand, although slightly subdued, was generally good across the capital stack for both for Pepper’s non-conforming RMBS, the £400m Castell 2026-1 and Newday’s latest Credit Card ABS from its white label shelf, the Partnership Funding series.  

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The question for this week and beyond is whether we now start to see an Iran war impact in earnest. The Financial Times is reporting this morning that countries around the world are 10 days away from a cliff-edge scenario as the Qatar-based flow of liquified natural gas comes to a halt. And there are fears that a sustained conflict could cause create data center chip supply shortages, raising prices for the sector and potentially causing major damage to stock markets that are heavily dependent on tech companies.

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A few bps wider due to plenty of supply and some geopolitical concern is one thing, a Ukraine-esque sustained energy shock could close the capital markets. The pipeline is much quieter today, but deals have tended to be announced from Tuesday onwards in recent weeks.

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Final Word

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Aside from my misery at Wembley, there was some good news for me and my colleagues at ARC.

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Very proud to say that our ARC Ratings Asia Pacific team has been granted a license to operate in Hong Kong! Anyone who’s worked in ratings knows how difficult getting licenses can be, but the end result means that ARC can help more clients in Asia and clients closer to home who have needs that expand to the Hong Kong region.

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Good things come to those who wait, but our expansion plans as a business remain on track. You can read the full announcement here.

Have a great week

Tom