In a report released today, Citigroup Global Markets analysts said that a record 72% of selected issuers the firm looked at called all eligible auto ABS deals promptly during their latest survey period, which is Sep. 11 to Nov. 12.
The bank counted 13 issuers: Ford Motor Co., Harley-Davidson, Honda Motor Co., Nissan Motor Acceptance Corp., Capital One, CarMax Auto Finance, DaimlerChrysler Corp., Goldman Sachs, Hyundai Motor Finance Co., Long Beach Acceptance Corp., Triad Financial, USAA, and Volkswagen.
including transactions called within two months of the eligible call date, optional calls executed have reached a record 89% over the survey period. Analysts said this record call performance resulted from deeply in-the-money purchase options coming from historically low interest rates and tight credit spreads.
According to Citi analysts, there were two issuers that did not exercise eligible calls within a three-month period that have certain characteristics that they share. These firms both have limited capital markets access and ABS serves as their main source of financing. This factor should be heavily weighted when looking at the optional call risk, Citi analysts said.
While it is not surprising to see record calls in such an in-the money period, the auto ABS market has "an impressive call exercise track record during both in- and out-of the money periods," analysts wrote.
Issuers that received special mention are Ford, Harley-Davidson, Honda and Nissan, which are firms that have called all issues promptly since 1999, Citi analysts stated.