7/7/2025
Last week, the tears of UK Chancellor Rachel Reeves managed to move markets more than one of the most severe Russian strikes on Kyiv since the war in Ukraine began. It’s a baffling juxtaposition—but then, in markets as in politics, it’s no longer clear what qualifies as surprising.
As Reeves sat beside Prime Minister Keir Starmer during PMQs, visibly emotional before a single tear rolled down her cheek, Gilt markets jolted to attention. The rumour mill went into overdrive: Was she about to be sacked in a Labour Party reshuffle?
With talk of a possible shift toward a Chancellor more willing to break “fiscal rules”, UK 10Y yields spiked above 4.6%. If she was close to leaving, the Gilt investors might have saved her.
Reeves’ spokesperson later dismissed the incident as a “personal matter,” and Starmer later pledged his full support. Today, Monday July 7th, it all feels like a storm in a teacup – at least from the market’s perspective.
Yet throughout last week, European ABS as a whole has remained serenely indifferent. Primary execution proceeded smoothly with seven deals across sterling and euros, spreads were steady, and risk appetite appeared unchanged. Technicals, not headlines, continue to anchor this market.
The UK RMBS market has restarted well since Global ABS, and it is clear the market is open to all.
Santander launched its £750m Prime RMBS, Holmes Master Issuer 2025-2, in just two days of marketing. The single AAA tranche was priced at 50bps over Sonia, and while the likes of Coventry Building Society and Nationwide both printed in the high 40s, one shouldn’t read too much into this.
Both of those deals were £500m. Newcastle Building Society’s debut RMBS, which also landed on 50bps, was only selling £350m of AAA paper. Moving £750m is a rather different task. This was about getting £750m of paper out the door, not quibbling over a couple of basis points.
Meanwhile, specialist later-life lender, LiveMore has returned to the RMBS market for the second time after a successful outing just over a year ago. The £215m Exmoor Funding 2025-1 is an RMBS consisting of lending to older borrowers, with the weighted average age of the youngest borrower being 63.7 years. The mortgages are either retirement interest only (RIO) loans or interest only (IO).
It is not an equity release mortgage securitization, but there are some similarities in the way the portfolio behaves and the calculations around morbidity.
As such, it’s not straightforward in comparing Exmoor with other deals in the market. UK BTL RMBS does have similar IO loans, and while this is technically a non-standard Prime RMBS according to Concept ABS, the deal landed in that BTL region.
The second album can often be harder than the first, so for LiveMore, pricing the Class A’s at 76bps over Sonia, 12bps inside the May 2024 debut, will be a welcome sight.
With investor demand so strong that not even the prospect of chaos in Westminster could derail it, Pepper UK launched its largest ever Polaris deal, Polaris 2025-2, just a few months after issuing £550m through Polaris 2025-1. Unlike the first deal of the year, there were no BTL loans included, just £600m of owner-occupied non-conforming mortgages.
IPTs started cautiously, but drew up strong demand with Classes A-D 1.7x, 5.1x, 5.2x and 3.7x covered, respectively. All four tranches came in significantly tighter than IPTs.
Capping off the week in sterling was Kensington Mortgages’ (now owned by Barclays) £597m Finsbury Square 2025-1. Much of the transaction, including the £495.8m AAAs were pre-placed, but the four 95% offered tranches, classes B-E priced in line with IPTs.
In euros, three deals were priced, but perhaps the most interesting was the presence of a PLN 1.36bn (€320m) Polish Auto ABS from Vehis Finanse. The deal was mainly placed with the European Investment Bank and included bilateral guarantees from the European Investment Fund on Classes A2 and B.
But it is yet another sign that the EU is serious about showcasing the benefits of securitization beyond the core member states of France, Germany, Holland, Spain and Italy that already use it.
Many in the lobbying/political world of securitization feel this is a crucial step in getting meaningful reform through the European Parliament.
Meanwhile, Dutch auto lender LeasePlan priced its €500m auto ABS, Bumper NL 2025-1, at the tightest level for Dutch Auto since May 2021, at 60bps over one-month Euribor.
And finally, Hyundai made its Italian Auto debut with the €750m Fulvia SPV, which had a last minute upsize and tightened significantly off the back of strong demand.
As we enter July, the temptation is to believe the stereotype of European attitudes towards holidays. Unlike our American brothers, out here we take two months off to enjoy the sun.
But sadly, that has become less and less true in recent years. Indeed, there is just one French Consumer ABS in the market from BNP Paribas but I would expect a fair bit of activity right up until the start of August.
If anything, it could be smarter to come to market now rather than wait for forces outside of your control to upend the technicals by September.
One of the great joys of the securitization market is how weird it can get. And so, I must highlight the story of UK lender, Ferovinum, which closed a unique wine and spirits ABS in June – brilliantly named as Project Cork.
It’s a $550m transaction that can be drawn in multiple currencies. Essentially, the approach is to provide working capital to wine and spirit producers.
Last year, as I left GlobalCapital, I wrote about the potential for wine to be securitized. But those focused on it more as an extremely expensive asset which will appreciate in value over time and trading it as a collectible. This Ferovinum deal is special because it’s not playing in that super-expensive, fine wine world.
For more information, my old colleague George Smith has written an excellent piece, here (behind paywall).
That’s all for me this week. If you’ve been forwarded this newsletter, don’t forget to subscribe.
And please send through your feedback in the form below or via email. We want to make this the best, most useful newsletter around, so it’s all really helpful in creating that.
Have a great week,
Tom
© 2025 ARC Risk Models Limited
