European securitisation up 40% this year

The first quarter of 2006 saw issuance up by 40% compared with the first quarter of 2005, at €65 billion, according to the European Securitisation Forum (ESF). But the figure was down significantly from the previous quarter, which showed €135 billion issuance. The fourth quarter of the year, however, is traditionally the strongest, the ESF said.

The majority of the issuance was in the form of residential mortgage-backed securities (RMBS), which saw volumes of €39.4 billion, up 46.7% from 2005. RMBS also represent 59% of total issuance, up from 44% in the fourth quarter of 2005.

The ESF expects issuance in this sector to continue to grow strongly. "The long-term market potential for RMBS has barely been scratched given [that] a relatively small percentage of residential mortgages have been securitised in Europe," said Rick Watson, the ESF's managing director.

Collateralised debt obligations (CDO) were the second-largest market sector. And they grew faster than any other sector - up 60% to €10.6 billion from 2005. Continued use of collateralised loan obligations on leveraged loans meant this sector of the CDO market was the largest, representing 40% of total CDO issuance.

The UK continues to dominate the European securitisation market, with 60% of all issuance occurring in the UK. Spain and the Netherlands are in second and third place respectively, with about 13% each.