6/30/2025
After a lengthy hiatus and a less than stellar year to date, sterling issuance is back. But if it’s to stand any chance of matching 2024 volumes, the UK market had better get its skates on.
So far in 2025, UK volumes have only just crept over the €10bn (equivalent) mark, according to Concept ABS. That’s a long way behind 2024, which was already over €15bn by the end of June.
It’s easy to point the finger at the various macro-noises from early Spring and ongoing geopolitical tensions in the Middle-East and Ukraine, but in truth, origination is the main problem.
RMBS (in all its forms) represents the vast majority of the sterling market but mortgage lending has decreased significantly since the 2022 peak. According to data from UK Finance, gross mortgage lending hit £322bn in 2022 but fell by over a quarter to £235bn by 2024.
Meanwhile, 2025 is only set to mildly recover to £260bn as interest rate pressure eases.
As ever in markets though, there are winners and losers. With lower supply and greater demand, those who are able to issue can drive a hard bargain – irrespective of the latest global conflicts dominating the airwaves.
The city of Newcastle has had a great year, seeing its beloved football club win a trophy for the first time since 1955. And Newcastle Building Society’s RMBS – the £711.4m Hadrian Funding 2025-1 – had a debut to rival the Toon Army legend, Kevin Keegan. Fun fact: my mum still fancies him. To see why, click here.
Despite more Middle-East tensions, arrangers BNP Paribas and BofA were able to bring the sole-marketed £350m AAA tranche in from mid50bps IPTs down to 50bps over Sonia, a level normally reserved only for seasoned RMBS professionals.
Speaking of seasoned pros, Coventry Building Society also came away with a solid win this week, after a successful pricing of the £500m Economic Master Issuer 2025-1. Again, just one tranche was offered, and books reached 2.2x covered on a £350m tranche size at 45-47bps WPIR. Coventry opted to upsize instead of grinding tighter, so the deal finished at £500m on 47bps over Sonia – level with the tightest Prime RMBS prints of the year.
Outside of Prime RMBS, there was more UK BTL paper, this time from Keystone Property Finance, who have a forward flow agreement with well-known ABS investors, 24 Asset Management.
It’s the fifth deal from the Hops Hill shelf, a £400m full cap-stack offering, which has seen strong demand from the get go. IPTs on the AAA Class A’s went from 80bps to 73bps over Sonia and 2.4x covered, and there was £80m of prefunding as well. Classes B-D tightened significantly too, with coverage finishing on 5.1x, 5.2x and 2x, respectively.
There hasn’t been anything like the sort of UK BTL supply that we’ve come to expect in 2025, but nevertheless, 73bps over Sonia represents the tightest AAA print since the war in Ukraine began in 2022.
Away from RMBS, there was also some welcome issuance from NewDay in what must feel like a rather lonely UK Credit Card ABS market, and from Bank of America in CMBS, which is going through something of a resurgence this year overall.
BofA’s latest Taurus CMBS deal, its third of the year, capitalized on heavy demand to see significant tightening across the capital stack.
The £267m deal is rather small, but coverage from Class A-E was 2.2x, 4.1x, 5x, 5.2x, and 5.5x respectively. And as such it was no surprise to see IPTs come in dramatically, particularly on the D and E classes, where spreads went from 315-325bps and 430-450bps to 280bps and 380bps over Sonia, respectively.
The CMBS conduit deal is backed by a £281m loan to Strarlight Bidco, which is owned by Starwood Capital, to finance a range of logistics industrial assets and a retail park asset in Berkshire.
NewDay’s second Credit Card ABS of the year, the £400m Newday Funding Master Issuer 2025-2, is the issuer’s and the UK market’s second of 2025. No other credit card issuer has been since April 2024, when Capital on Tap priced its London Cards No.2 deal.
And yes, you guessed it, they tightened across the capital stack following heavy demand. The Class E’s were even 7x covered at 300bps over Sonia, while the Class A’s finished at 80bps over Sonia, 5bps inside of the 2025-1 deal from March.
Across the channel, BMW Bank ended its 4-year French hiatus in Auto ABS and returned to market with the €643.3m Bavarian Sky French Auto Leases 5. The quietness of European ABS since Global ABS meant they were able upsize the Class A’s to €500m and bring in spreads to 60bps over 1-month Euribor.
Clearly, the deals of this past week have shown issuers they have little to fear despite the macro-noise, and it seems many are taking heed.
In sterling there is an “older borrower” RMBS from LiveMore (but it’s not reverse mortgages), a rare outing from Barclays-owned Kensington in non-conforming RMBS, and another non-conforming deal from Pepper Money.
In euros, Hyundai is set for a debut Italian Auto ABS, with a portion of the AAA’s already pre-placed. Expect to see more by Monday afternoon.
That’s all from me this week, but I shall use these final words to put out an appeal to any Surrey-based golfers in the greater Guildford area.
I am soon to become a homeowner in the nearby town of Godalming (my fiancé tells me the “quintessential British village” scenes of The Holiday were filmed here…), but I need a golf club. I have no knowledge of these beautiful areas, and no friends to get me into the good clubs.
Please reach out if you have any recommendations. I promise no ABS talk on the course.
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Have a great week,
Tom
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