The non-mortgage ABS primary market has seen its strongest start since the 2008 to 2009 credit crisis, according to a Barclays Capital report released this afternoon.
Barclays said 1Q12 issuance has reached $45.9 billion and year-to-date volume is now at $61 billion.
In its 2012 outlook report, analysts projected issuance levels to be $100 to 115 billion. Considering year-to-date issuance volumes and the primary market pipeline's strength, analysts have revised their 2012 issuance projection upward. They now expect total issuance volume to reach $125 to $ 140 billion, driven mosty by the auto sector.
As expected and as it has been for the last couple of years, auto-related deals have the largest share of new-issue volume year-to-date ($38 billion comprising over 64% of the non-mortgage ABS market), followed distantly by credit card and equipment loan/lease asset-backeds.
They said that the non-mortgage ABS primary market remained active this week, with $6 billion from six issuers pricing. This included five auto-related and one equipment-backed deal.
According to Barclays analysts, inspite of the heavy new-issue pipeline and the ongoing chase for yield, generic consumer ABS spreads were mostly unchanged or tighter week-over-week. They are still overweight auto subordinates and the off-the-run auto-related sectors of rental fleet and fleet lease ABS.
Wells Fargo Forecast
According to Wells Fargo analysts, consumer ABS saw another brisk couple of weeks of new-issue volume, which pushed the total for 2012 year-to-date to $53.9 billion, analysts stated.
Issuance has crossed the $50 billion threshold roughly two months ahead of the 2011 pace, analysts said. Because of this, they are also changing their projection for new-issue volume in consumer ABS for 2012. Their new estimate is $139 billion, increasing from $115 billion.
Auto ABS are still leading the way with $31.4 billion of volume, accounting for 58% of the market. Much of the strength in autos can be attributed to the rise in new-vehicle sales, which, over the trailing 12 months, rose to 13.1 million units through March 2012. Low interest rates, tight credit spreads and strong investor demand should keep term-securitization funding costs comparatively low.
Principal pay-downs, faster turnover and a more focused market would probably have implications for consumer ABS demand and equilibrium spreads. But, the net effect on spreads might be difficult to project until there is more data regarding the entry and exit of buyers and the eventual composition of the consumer ABS market.