The U.S. non-mortgage term ABS market saw more downgrades than upgrades last year, but analysts from Fitch Ratings expect the picture to even out in 2005, amid a stable ABS market. Fitch issued 183 upgrades, versus 221 downgrades in 2004, but considering that Fitch issued 66 upgrades and more than 1,000 downgrades in 2003, it looks as if an even brighter ratings picture is on the way. Kevin D'Albert, a director at Fitch, said stable collateral performance and improving credit enhancement have helped to keep the pace of upgrades strong and that the trend should continue into 2005.

The leading sectors, autos and tobacco, saw 63 and 52 upgrades respectively, with all the positive ratings activity in the tobacco sector due to counter party related factors. All of the tobacco upgrades were in Golden State Tobacco's bonds, as the state of California had its debt rating upgraded. Golden State's bonds were issued through the state, so the upgrade affected their bonds as well. The equipment sector saw 32 upgrades, credit cards had 15 - nine of which were counter party related - and there were 15 upgrades in the student loan sector and also the time-share sector had eight upgrades.

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