In a report today, Moody’s Investors Service said that the outstanding volume of asset-backed commercial paper issued by U.S. conduits has risen for the first time since 2007, when the short-term securities slipped into a seemingly unstoppable decline.
The current outstandings of U.S. conduit ABCP rated by the agency totaled $213.8 billion as of September 2014, a 1.3% uptick from a year earlier.
For multiseller conduits — the bread-and-butter subcategory that basically covers banks’ funding of their customers assets — the figure climbed 3.6% to $152.5 billion, from $147 billion in September 2013.
While included only those deals it rates, the agency suggested the figures are part of a broader trend.
The volume is rising on the back of greater issuance, which, in turn, is being fueled by several catalysts, according to Moody’s. One of them is brisker economic growth, which has been boosting the supply of assets that need funding.
A breakdown of the assets that are being funded by the multiseller conduits shows that auto loans — a prime beneficiary of pent-up demand, economic recovery and low interest rates — have increased their share of the collateral backed ABCP to nearly 34% in August 2014 from about 29% a year earlier.
Also powering issuance is greater regulatory certainty and the implementation of final rules that were less punishing that some had anticipated. For instance, the Volcker Rule — which prohibits banks from owning certain kinds of instruments — has provided a carve-out for ABCP that are bank-sponsored.
Moody’s also said that banks have now made a firm decision on whether they want to stay in the ABCP or not, a change from the last few years of many originators vacillating on their commitment to the sector in the evolving environment.
The U.S. Federal Reserve has yet to capture the rising volume of ABCP. Total ABCP outstanding issued by U.S. conduits as measured by the monetary authority was $228.6 billion in September 2014, a 10.5% drop year-on-year.
Moody’s pointed out that the overall Fed number is higher than the agency’s because it includes additional instruments.