The supply of consumer asset-backed securities (ABS) should remain strong for the rest of this year and well into 2022, even if at a slower rate, due to issuers securing end-of-year financing, strong investor demand, and low benchmark rates, according to a recent report from Kroll Bond Rating Agency (KBRA).
KBRA projects full-year volumes to approach $195 billion, passing the post-global financial crisis record set in 2018 of $172 billion, provided that the new-issue volume rate remains the same through early December, the report said
For context, in the first nine months of the year, the consumer ABS market produced record new -issue volume with more than $151 billion priced, increasing 14% and 44%, respectively, over 2019 and 2020 during the same period, according to KBRA.
Only the timeshare and device payment plan sectors didn’t experience year-over-year growth compared to 2020, the report said. The auto lease and non-prime auto sectors fueled most of 2021’s volume growth.
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All of the ‘AAA’ and ‘AA’ consumer ABS ratings by KBRA have remained stable during the pandemic, despite the expectation that consumer-credit performance would weaken after government safety net programs stopped.
Since March 2020, KBRA has upgraded the ratings for 502 securities and affirmed the ratings for 1,606 note classes. Only two solar loan-backed tranches were downgraded since the pandemic began, the report said.
In the consumer ABS sector, KBRA upgraded 32.1% of auto loans (311); 20.8 % (66) of consumer loans; 23.1% (9) of credit cards; 25.4% (104) of consumer-marketplace lending (104); and 2.7% (6) of solar. No student loans were upgraded and all were affirmed by KBRA.
Real personal incomes and household savings rose over the past year-and-a-half due to lower consumer spending during quarantine and travel shutdowns. Government stimulus checks, loan forbearances, unemployment checks and hardship-relief programs also helped consumers’ personal finances, according to KBRA
Most of the pandemic prompted safety-net programs ended or will soon end, Kroll said, but borrowers may be able use credit cards, which saw balances fall by 15%during the pandemic) or their savings for purchasing power.
