Wells Fargo analysts, in a report released this morning, said that they expect consumer asset-backed issuance to reach $170 billion in 2012. This is 60% more than 2011, they said.
They expect roughly $20 billion of new consumer ABS just in September with the assumption that the usual seasonal trends hold. The pace of issuance is anticipated to stay brisk in October and November, with analysts once again assuming that no macroeconomic or political disruptions to the financial markets will curb this growth.
Prime auto ABS still have the lion's share of the consumer ABS market by a margin of over 2:1. But, a revival in credit cards, subprime autos, student loans, and floorplan ABS have also given their share to a larger-than-expected issuance rise this year, Wells Fargo analysts stated.
As of Sept. 14, 42.6% of new-issue ABS had original maturities of two years or less, which decreased from 47% in April, the report said. The rising issuance from longer average-life credit cards, student loans, and floorplans has partly caused this modest shift. This measure was just 20% in 2007, but analysts do not think that the maturity schedule will return to that mix.
The price discovery based on new deals implies that the market is still on firm footing, they said. The strong demand and tighter spreads are drawing more issuance to the ABS market. This helps transparency and liquidity, analysts added.
There is tiering among issuers and sectors that is still notable, which analysts think offers good relative value opportunities.
Additionally, they noted that dealer floorplan ABS volume has reached $11 billion thus far in 2012. Analysts think that the considerable spread concession to benchmark prime autos offers good relative value.
The potential risks to the firm's outlook include a weaker economic recovery and stalling consumer credit growth, a student loan debt overhang based on potential borrowers, certain policies that can hinder ABS growth, presidential politics as well as the fiscal cliff.