Several major underwriters have stepped up efforts to sell blocks of prime auto paper, cashing in on recent tightening and taking profits, sources said. Currently, prime auto spreads are near historical lows and some believe it's only a matter of time before spread reversion kicks in. On the other side of that position, however, is the realization that this isn't a late 1990s economy and that moderate credit deterioration appears here to stay for the remainder of the year.
While the credit environment is currently rugged, the security and liquidity of prime auto ABS may be losing its allure, investors hinted, due to the limited upside. "There are certain deals from particular issuers we participate in despite the tight spreads, but on other paper we find it too expensive," one investor said.