Credit card ABS performance stayed strong in Wells Fargo Securities' credit card indices for March's distribution period, according to a report released this afternoon.
The charge-off rate index reached 4.25%, which is the lowest number since fall 2007. The excess spread stayed high at 10.86% while the monthly payment rate index was at 20.88%, analysts reported.
Analysts think that low delinquency and default rates as especially notable considering the "shrinking receivables base" in the firm's index. This data should mean that the absolute dollar volume of delinquent and defaulted accounts is decreasing. The low rates manifest the strong credit profile of borrowers who are still in the trusts, analysts explained.
Market players appeared to agree with this view based on where credit card ABS spreads in 1Q12. The 'AAA' credit card ABS spreads started to tighten at the beginning of this year, and bonds with maturities of one year or less went into negative territory.
Spreads on subordinated bonds have tightened as well, and are 25 basis points tighter than they were at year-end 2011, even though they have lagged senior bonds. Given the solid credit performance of credit card ABS, analysts think that subordinated bonds still offer good relative value.
Analysts estimated that $5.7 billion of credit card ABS is set to mature in March, and another $11.2 billion will mature in April. New-issue credit card ABS is probably going to be muted in 2012, analysts said.
Consumers appear hesitant to add more leverage. Revolving consumer credit outstanding is merely recovering from the low reached in early last year, analysts stated.
