Last week Moody's Investors Service released its third quarter review/outlook, noting in its summary opinion that, had Sept. 11 never happened, third quarter 2001 would have been relatively uneventful.
As for pre-Sept. 11 headlines, Bank of America announced it would exit the subprime home equity business, and in the process securitize more than $20 billion worth of product, which solicited mixed opinions from Street researchers as to the impact the so-called nine-month sell off would have on spreads. Also significant, GE Capital announced it would acquire Heller Financial.
"They are big events, but are they earth-shattering?" asked Kent Becker, who compiles Moody's quarterly reviews. Since Sept. 11, Becker, like other ABS analysts, was left to the task of piecing together an outlook on perhaps the most uncertain market since the liquidity fallout from the Russian debt crisis of 1998.
Of major themes, Becker points to the flight to quality, which will likely rouse up the use of triple-A monoline insurance policies, especially for esoteric asset classes and lesser known issuers.
"I think the flight to quality issue will be an important one," Becker said. "The market will favor securities issued by stable names and conventional asset classes, or deals insured by monolines."
Other developments include the prospect of further rate cuts, continued deterioration of consumer credit, and slim-to-no issuance from the sectors most impacted by the recent events, including aircraft leases, rental cars, and timeshare receivables.