SFVegas: Conflicting data creating caution across US ABS

August 8, 2022

Spreads could widen further but confidence in deal structure remains

US securitization market participants are becoming increasingly cautious amid concerns over US consumer sentiment and apparently mixed signals from economic data points.

During a panel at SFVegas, Silvio Tavares, CEO of credit-score developer VantageScore, presented data on the health of the US consumer that he said showed “worrying trends”.

“Delinquencies are rising, we’re seeing signs of deterioration among less resilient segments and we think those delinquencies are going to continue to rise,” Tavares said. He added that there were a lot of “conflicting data points” on the state of the consumer.

This was a prominent theme throughout SFVegas, with panellists and delegates describing their uncertainty over the future for the US ABS market. One ABS banker said it was clear that market participants were acting with greater “discipline”, whether that be investors being careful with their capital or issuers becoming more sensitive to the release of inflation metrics or Federal Reserve meetings.

As the cautious atmosphere grows, tech vendors that are able to provide real-time data and analysis on various consumer markets are in high demand, one source told GlobalCapital.

Meanwhile, rating agency KBRA has revised its RMBS issuance forecast for 2022 to $112bn, which would be an 8% decline on 2021. This comes after a second quarter that was $10bn lower than expected, at just under $28bn, with prime RMBS issuance down 55% from the previous quarter.

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This article was originally published by Global Capital on July 21, 2022.