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Opinion

HBOS attempts a jump-start

HBOS deserves the gratitude of its rivals for its attempt at a UK RMBS benchmark, but it may prove futile in the short term.

The refrain has been unilateral and increasingly plaintive: "The European securitization market cannot recover until one of the UK master trusts comes back to the market". With spreads having shot from around 9 basis points over Libor to triple digits last summer it is hardly a surprise that those master trust issuers were less than enthusiastic to assume the role of trailblazer. So when HBOS announced a small (£500 million) issuance from its own Permanent UK RMBS master trust in May it was both a sign of how far the market had fallen and a signal seized upon by some that the worst could really be over.

HBOS is unequivocal that this was an attempt to set a benchmark pure and simple. This Permanent trade tries to establish a level at which European ABS can trade again. It also aims to restore a shred of normality to the RMBS market and enable more esoteric asset classes such as CMBS to find some sort of level.

The move is well-intentioned, any benefit may be some time coming. How can securitization hope to return as a realistic funding option for bank lenders while spreads remain so high? The banks’ efforts to rebuild equity capital have distracted attention from their funding struggles.

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