The European ABS market showed remarkable resiliency in the face of macro and financial institution instability last year and managed to keep the new issues pipeline open even when bank senior unsecured credit and covered bonds shut down.

According to a report from Henderson Global Investors, senior ranking ABS will continue to prove to be a relatively safe place to be invested during such volatility and that long term fundamental returns will continue to look attractive.

Senior ABS returns held up relatively well during 2011  and the lower rated and subordinate ABS experienced price volatility similar to high yield corporate bonds but with a lower current yield making the overall total return impact greater.  

"Senior ABS generally proved relatively resilient in the face of the many challenges faced by risk asset classes in 2011 and fundamental credit performance of European ABS continues to be far better than many of the headlines and regulatory initiatives would indicate," said analysts in the report. "We expect that over time a broader range of investors will therefore consider ABS as a core part of investment portfolios."

The analysts said that volumes could potentially  return to a “steady state” €100 to €200 billion issuance market, if politicians and regulators start to soften their approach.  

 

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