Despite the lack of activity last week, the market for asset-backed securities is benefitting from the sense that the repricing of the market has largely run its course, according to analysts at Deutsche Bank.
In research published Wednesday, Deutsche noted that the first week of the second half of the year was one of the most uneventful of the year: No new deals priced and there are none scheduled for this week. Secondary market flows were also light last week at under $800 million and were dominated by money managers and insurance companies.
“Despite the lack of activity, the ABS market is benefitting from it in the sense that the selling pressures that were evident late last month as investors moved into other sectors like CMBS are no longer meaningful,” the report said. “This implies the repricing of the market has largely run its course. However, it will take the price visibility new deals can provide to confirm that view.”
Deutsche analysts noted that June, it was the worst month of the year for spread performance. Top-tier short-duration senior paper widened by 4 to 25 basis points, while top-tier subordinates widened by 50 to 65 basis points. The widening in June left spreads across profiles net wider on the quarter and for the year.
Issuance for the month was just over $10 billion, which was well below the $16 billion per month average in 2013. On the year, issuance volume stands at $91 billion, which is 9% less than the comparable period last year.
“Over the rest of the summer we expect issuance volumes to remain at or below $10 billion per month and a relative increase in top-tier on the run deals as execution risk in the current environment is significantly less for those profiles,” the report said.