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Sales of agency MBS holdings by banks are driving prices down, a reduction in portfolio lending by banks is helping to spur ABS issuance and the CMBS market is waiting for banks to take write-downs on commercial loans.
Attendance at the ABS East conference hit a record this week even as industry participants are anticipating a recession. Parts of the ABS market are offering investors better returns than corporate debt.
Bank demand for agency MBS is weak, leading to wider spreads and losses on MBS holdings for some. Banks are also reducing their lending activity, providing an opening for nonbanks.
Delinquencies are rising on commercial MBS, driven by office properties. Losses are expected to follow and it could be years before the situation improves.