The most recent Fitch Ratings Credit Card Index results show charge-offs improving dramatically, falling 359 basis points to 3.29%. One-month excess spread improved in the latest period by 306 basis points to a robust 8.38%, which brought three-month average excess spread up 112 basis points to 6%. Last fall's spike in personal bankruptcy filings has worked its way through U.S. credit card master trusts' performance measures. The results are considered positive for credit card ABS investors and issuers, though the magnitude of the improvement will be somewhat temporary.
"The pig in the python has been fully digested," said Fitch senior director Darryl Osojnak. "The outlook for charge-offs is positive over the near term and master trusts should benefit from increased levels of excess spread going forward. As such, Fitch expects to affirm substantially all of its outstanding credit card ABS transactions in the coming weeks."
As Fitch predicted in September 2005, U.S. credit card charge-offs reached elevated levels in late fourth quarter 2005 and early 2006. However, as of Jan. 31, personal bankruptcy filings fell considerably, with a weekly average of 6,000 filings since Oct. 17. The weekly average for 2005 before the new bankruptcy law went into effect was 47,000 filings, with peak volume of 315,000 filings during the week of Oct. 17. Year-over-year bankruptcy filings are down 75.8% through Jan. 31, the rating agency said.
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