Asset Backed Securities

Headlines have painted a nervous picture of the health of consumers across Europe. Simultaneously, rating agencies have upgraded their outlook on the same consumer assets to neutral. The short story is that, although there has been a mild weakening in performance metrics, the consumer has held up well and is ahead of our base case expectations in almost all areas.

Securitisation made its latest appearance in the mainstream financial press this week with the news that the European commercial mortgage-backed security (CMBS) market is set to experience its first losses on AAA bonds since the global financial crisis.

In the first week of June, the European asset-backed securities (ABS) market participants flocked to sunny Barcelona for the 28th Global ABS conference.

Much like the European market, Australian ABS has started 2024 with considerable momentum, with over AU$12bn in issuance year-to-date and a significant pipeline building. But how are its green credentials?

Last year was a volatile year for global markets but also one where economies performed better than expected. If we look at the leveraged loan market, last year was characterised by a surge in so-called amend and extend (A&E).

Within the European ABS landscape, Volkswagen Leasing has solidified its role as a benchmark issuer under the Volkswagen Compartment Leasing (VCL) platform. Volkswagen uses this platform – with over 25 years of history – to finance standard German auto loans. It is probably one of the least exciting platforms but also one of the most liquid ABS investments you can buy.

After a horrible year for financial markets in 2022, the macro-outlook for 2023 had a lot of consensus views, with most predicting a much better year ahead, helped by supportive rate cuts from central banks and positive returns from both government bonds and credit.  

There has been a noticeable pick up in the European ABS new issuance market this year, with demand far outstripping supply. John Lawler looks at what makes a UK RMBS deal ‘Prime’, and why not all deals are the same.

Given the current macro environment, Pauline Quirin believes loans with near term maturities provide a useful insight into where risk lie.

With commercial real estate continuing to suffer the effects of the COVID pandemic and inflation, Elena Rinaldi looks at one CMBS transaction highlighting the challenges facing the asset class.

With Norinchukin Bank reportedly looking again at CLOs, Aza Teeuwen looks at the potential impact the return of the one of the market’s biggest buyers might have on spreads.

Strong performance across markets in January has left some investors feeling they’ve missed out on the rally in bonds. No need to worry, says Felipe Villarroel.