At one point during the pandemic, used car prices were up 50% year over year. Now, appreciation is around 20%, prompting speculation that auto ABS performance will take a hit.
CLO issuance has gained speed with the macro environment looking good and interest rates rising. Note: While S&P was quick to downgrade deals during the pandemic, upgrades have been slower.
The extension rate on loans in auto ABS declined again in February. Still, extensions are elevated compared with a year ago, just before the pandemic hit the economy.
Loan extensions on auto ABS increased for the third straight month in November amid rising coronavirus cases. Losses for investors could be around the corner, according to S&P Global Ratings.
Issuance of container ABS surged in the third quarter of 2020 only to deflate in the fourth quarter. KBRA has a positive outlook for the sector despite the ongoing coronavirus.
For years, industry analysts raised concerns about the quality of CLOs, warning of poor performance. While issues from the coronavirus prompted some problems, AAA-rated tranches of CLOs have held strong.
The property assessed clean energy ABS issued by Renovate America are “largely insulated” from the company’s financial troubles given its limited involvement in the deals post-issuance, according to KBRA.
The expiration of payment relief will result in a modest increase in delinquencies but resumed payments will support cash flows for the ABS deals, according to industry analysts.
Less than $1 billion of credit card ABS were issued in the first nine months of 2020 even though outstanding deals are performing well. Delinquencies are expected to increase.
The creation of a U.S. sovereign wealth fund could grease the skids for an end to the conservatorships of Fannie Mae and Freddie Mac.
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