Argentine issuance rose in the last few months, not in the least bit scraped by a spike in interest rates. Yet the future isn't as bright, with tighter regulatory scrutiny of consumer ABS (see story below) and poor diversity away from that asset class likely to take a toll.

In light of the global climate, however, growth has been impressive. Domestic issuance of ABS and MBS hit Ps7.3 billion ($2.3 billion) in the first 11 months of 2007, up 23% from the same timeframe last year, according to Gainvest Asset Management. Even after global turmoil forced average yields on senior tranches of ABS past 10% in August (see table), issuance proved resilient, with volumes up 34% in November year-on-year.

This month should be no different. "December's generally very strong," said Enrique Algorta, deputy head of capital markets at Gainvest. "There are a lot of originators that finance their operations with a take out in December." The average duration of the senior series of deals remains low, reflecting the stubborn lack of interest in taking long-term risk in Argentina. Delinquencies on consumer deals are rare and the country shows no signs of mimicking the U.S. subprime crisis, Algorta said. Consumers have been faithfully paying credit debt hovering at 40% annual rates, while penalties for late payments have actually led to higher flows than expected in some cases, he added. "Pools haven't deteriorated at all."

But growth is unlikely to hold indefinitely, as authorities seemed to be taking a jaundiced view of consumer ABS, which accounted for a whopping 83% of issuance in the year through November.

Other asset classes have been less than compelling. Mortgages are not a profitable business following the 2002 crisis. Banks only originate them as a cross-selling strategy, making MBS sporadic. Infrastructure - glowing with promise when a gas pipeline ABS surfaced last December - lost its luster when that same project became entangled in a bribery scandal.

(c) 2007 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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