RMBS: HBOS sets a much-needed benchmark for Europe

A starker illustration of how things have changed in the ABS market would be hard to find. In late May, UK bank HBOS made public details of a £500 million single-tranche, triple-A rated issue from its Permanent UK RMBS master trust – a deal that was seized upon by the market as a sign that the worst was over. Before last summer, HBOS was routinely issuing multi-billion sterling Permanent trades and paying about eight to nine basis points for triple-A paper. The triple-A notes in this deal pay 85bp over Libor. The deal was pre-placed with seven banks and insurance companies.

HBOS certainly did not undertake the deal for funding (it had raised funds in the unsecured market the week before) and the deal was done for strategic reasons. "This was an effort to kickstart the market and get the market moving again," explains Robert Plehn, head of securitization...