Thanks largely to the doldrums of the second half of the year, 07 marked a drop in issuance in those emerging markets that were 06’s bright young things.
Mexico, it appears, wasn’t an exception, but the first aggregate figures to come out on issuance show that the dip was negligible. And the number for 07 actually ends up looking okay when you consider that 06 was a record year – with volumes by some accounts more than doubling.
Adding up the categories of ABS/MBS, CDOs and future flows as tallied by the research team at IXE Grupo Financiero, securitization issuance totaled Ps78.5 billion ($7.2 billion), slipping 2.2% from Ps80.3 billion in 2007.
But the gross figure conceals some growth stories. IXE counted volumes of Ps44.3 billion in the ABS/MBS sphere, with 27 RMBS pricing last year, a brisk pace of issuance for Mexico. Banks bounded on to the field as originators in a market that had been dominated since its inception by non-bank issuers known as Sofols. HSBC Mexico came out with the largest Mexican RMBS ever in March, a Ps2.5 billion doozy, and was followed in December by a still larger deal originated by BBVA Bancomer.
What’s more, the first bonhito, an entirely new kind of MBS, was placed by Hipotecaria Total (see observation, p.32). And the market also witnessed what was apparently the second-ever CMBS, originated by holding company Grupo Acosta.
Future flow issuance, meanwhile, dropped to Ps19.8 billion from Ps31.3 billion in 2006. Among the more noteworthy issuances, the states of Michoacan, Oaxaca and Chiapas all placed deals backed by payroll taxes.
CDO placement in Mexico fell as well, to Ps14.3 billion from Ps22.0 billion, but the introduction of a CDO backed by domestic RMBS kept interest alive in the sector.
Even before there was a summer pause in issuance due to volatility in interest rates, the market was set to slightly under-perform 2006. The drain was actually coming not from subprime contagion but from highly liquid banks, which proved to be tough pricing competitors for securitization players.
Issuance aside, the year was a big one for monoline insurers, although in light of their current problems it remains to be seen whether some will be as warmly received by local investors this year. In theory, even downgraded Ambac should be, since Mexican buysiders have said all along that all they really care about is a triple-A on the national scale, and none of the major monolines is in any risk of losing that. (Indeed, Fitch Ratings confirmed its AAA(mex)’ on Ambac-wrapped deals originated by Patrimonio, as it downgraded the global scale rating of the same transactions to AA’). These transactions would probably have to drop into the single-A category for a downgrade of the national scale to take place.
MBIA and FSA secured their license to operate in the country in September, which meant that any other monoline that might want to provide wraps in the domestic public market needs to follow suit. The private and cross-border markets, though, don’t require licenses. But, again, it remains unclear just how strongly Mexican investor appetite for monoline wraps remains, especially for Ambac, MBIA, FGIC and XL, all of which have been active on the domestic front. Maybe the moment’s ripe for FSA, which has a local presence, and Assured Guaranty, which doesn’t, to build market share.
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