European securitisation reaches highest levels

While the report said tighter fiscal policy and anticipated interest rate hikes at the European Central Bank (ECB) this year might hurt growth as spreads narrow, the lower minimum capital requirements under Basel II to offset risks taken out against higher-grade securities should bolster the take-up of CMBS and CDOs as banks implement the new capital adequacy rules.

“Markets are continuing to anticipate the lower capital requirements for senior tranches of securitisation and CDO transactions when Basel II is implemented,” said Rick Watson, managing director and head of the ESF in London. “In addition, credit performance remained generally good [so] the combined effect resulted in an attractive spread environment and continuing need by investors to put their money to work.”

Fourth quarter issuance volume also established a new quarterly record of €135.7 billion, with 85% of transactions in the period coming before the ECB raised interest rates in the eurozone by 25 basis points on December 6, its first rates rise for 18 months.