An interesting facet of the asset-backed securities market is the ability some issuers have to shift the percentage of bonds they issue between fixed- and floating-rate deals to meet investor demand. The latest manifestation of this phenomenon is the heavy issuance of floaters during the first half of 2000. In a typical year, floaters account for roughly 35-40% of the overall ABS market. So far this year, floaters are running around 55%. This shift helped the market's increased appetite for floaters (due to an environment of concern over the Federal Reserve rate hikes and an inverted yield curve). Several factors influence the overall fixed/floater ratio. The mix varies within some ABS sectors according to changes in interest rates and business cycles. In other sectors it shifts in response to investor demand. In others, it is not influenced by any of these forces.
Sectors Showing Little Change