ABS update: S&P trims global 2020 issuance forecast by 25%
The macroeconomic impact of the COVID-19 pandemic has prompted S&P Global Ratings to trim nearly one-fourth of its original forecast for 2020 global asset-backed securities issuance.
The ratings agency has shaved its original $1.1 trillion forecast for global securitization issuance volume to $830 billion, as nearly every market experienced “considerable declines” in activity compared to year-to-date 2019 levels.
The U.S., for instance, is off nearly 30% with $201 billion in new ABS issuance in the first half of 2020, down from $289 billion in the first six months of 2019. S&P has lowered the full-year 2020 U.S. volume forecast to $370 billion from the original $560 billion estimate heading into the year – roughly two-thirds of the initial prediction.
The second half of the year is expected to remain vulnerable to the effects of coronavirus, including the “knock-on effects on market sentiment, interest rates, credit, etc.”
The largest sector in U.S. ABS issuance was the nearly $50 billion in auto loan/lease deal volume, with commercial ABS (including equipment, fleet, and dealer floorplan) at about $10 billion. Private student-loan ABS issuance was “moderately active” at over $8 billion while the credit-card sector was quiet at just over $2 billion.
CMBS issuance has half-year issuance level of $28 billion, off about 28% year-over-year, with projections of $40 billion to $60 billion for the full year. RMBS deals totaled $51 billion through June, down only 7% from the same period in 2019, making it the best performer of the major ABS sectors. S&P projects $90 billion to $100 billion in issuance by year’s end.
While collateralized loan obligations were active, volume of $35 billion was still down 46% against the first-half 2019 level of $65 billion. S&P forecasts a total of $60 for new CLO issuance at year’s end.
Most of the decline was in the second quarter, after the onset of the pandemic took root in the U.S. The first quarter ABS issuance was about $125 billion the first quarter, followed by $76 billion in Q2, “reflecting the effect of COVID-19 on the broader economy and the fallout for structured finance (and the underlying loans’) credit conditions/liquidity, spreads, etc.”
S&P also lowered the forecast for the two largest securitization markets outside the U.S. Europe is expected to only see €65 billion (US$75.21 billion) instead of the original €100 billion projection, while China’s forecast was lowered to the equivalent of US$290 billion from $330 billion.
Japan was the only market to maintain its original 2020 mark of US$55 billion, according to S&P.