ABS Sales Head for Best Week Since 2011 as ECB Signals PurchasesAlastair Marsh
Asset-backed debt sales are heading for their busiest week in three years as the European Central Bank said it’s preparing plans to purchase the securities to boost lending in the region.
ECB President Mario Draghi told a press conference in Frankfurt the central bank will buy “simple and transparent” notes that are backed by non-financial private sector assets. Almost 4 billion euros ($5.45 billion) of the debt will be sold this week, according to Rabobank, with the banking unit of U.K. grocer Tesco Plc and Banco Santander SA among issuers.
Investors had been looking for the ECB to flesh out proposals after Draghi said he wanted to revive the region’s $2 trillion ABS market. Policy makers want to build the market for bonds backed by loans to small- and medium-sized enterprises to increase funding to the businesses that employ about 70 percent of the European Union’s private-sector workers.
“There’s been some degree of hurry in the primary market for ABS this week because the ECB is meeting,” said Ruben van Leeuwen, an analyst at Rabobank in Utrecht.
Cheshunt, England-based Tesco sold its first public notes backed by credit card payments, raising 500 million pounds ($837 million) from AAA rated securities. The deal is only the second of its kind in Europe this year and comes after issuance of the credit card ABS fell to a four-year low in 2013 of 1.1 billion euros, according to JPMorgan Chase & Co.
Santander, Spain’s largest bank, offered its first bonds backed by U.K. home loan in 13 months, while Cardiff-based Principality Building Society, the biggest customer-owned lender in Wales, sold 475 million pounds of mortgage-backed notes.
The prospect of the ECB stimulating the ABS market is also encouraging Italian lenders to sell securitizations they retained during the sovereign debt crisis to use as collateral for central bank funding. About 76.8 billion euros of the nation’s mortgage-backed bonds are retained by the nation’s banks, according to Deutsche Bank AG.
Veneto Banca ScpA, which reopened the Italian market for bonds backed by home loans in April with the first new issue since 2011, sold 1 billion euros of securities yesterday, according to a person familiar with the matter. The notes were first issued in 2012 and kept on the Montebelluna, Italy-based lenders balance sheet.
Previously-retained bonds backed by loans from Banca Monte dei Paschi di Siena SpA and lenders belonging to the Credito Valtellinese group have also been sold this year, according to Deutsche Bank data.
“Second-tier Italian banks need to fund themselves and demonstrate to the ECB that they can do that,” said Conor O’Toole, head of European ABS research at Deutsche Bank in London. “The big banks like UniCredit or Intesa Sanpaolo can likely tap the senior unsecured bond market but the smaller banks may not be able to.”