Investors are showing strong demand for various types of esoteric ABS, including data center securitizations, whole-business transactions and deals tied to music royalties.
Attendance at the ABS East conference hit another record this week, with investors showing strong demand for structured finance products. Issuance is expected to remain elevated, helped by interest rate moves.
The key vehicle ABS sector slowed in the third quarter and business-finance securitization stalled. But issuance in the first nine months of 2024 was up 22.9% from last year. (Includes three data tables.)
Subprime auto deals that experienced distressed servicing transfers last year saw swings in delinquencies and ultimately took an elevated level of losses, according to Kroll Bond Rating Agency.
ABS backed by home equity investments are offering unlevered returns in the low double digits. The first rated HEI ABS was issued in October and industry players are anticipating exponential growth.
A task force at the National Association of Insurance Commissioners recommended adoption of a proposal to alter credit ratings on investments at insurance companies. However, NAIC didn’t move forward with the proposal at a meeting last week.
A proposal from FINRA to reduce the timeframe in which trades of MBS and ABS must be reported didn’t sit well with some industry participants, prompting the SEC to take a closer look at the proposal.
It’s been almost 20 years since the ABS market had a quarter like the first three months of 2024. Some 72 of the 114 issuers that brought deals to market in the first quarter were on the sidelines in the previous period. (Includes three data tables.)
CRT deals involving auto loans typically have a pro rata structure, which can create more risks for investors than the sequential pay structure in ABS transactions. Structures are also evolving, including a deal issued by a nonbank in partnership with a bank.
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