Consumer-related asset-backed securities have so far withstood the economic slowdown, both from a credit and spread perspective. But, as economists further revise their outlooks, and the threat of continued weakness and a longer-than-anticipated recovery looms, some investors are beginning to wonder if and when consumer ABS will start to feel the dregs.

Merrill Lynch's Alex Batcharov writes in a recent International ABS/MBS Weekly (8/30), "U.S. consumers must be doing relatively well these days, contrary to the corporates they are working for. Well, that's a paradox, which with the benefit of hindsight, will likely not be resolved in the first half or second half of year 2001."

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