Lowered fixed-income allocations will pressure structured finance credit spreads in the medium term, said Standard & Poor’s today.
The ratings agency referenced a report by Wilshire Trust. According to the report, the share of institutional investor assets allocated to U.S. dollar-denominated bonds fell to 26% in the second quarter from 30% a year earlier.
But in the short term, the new issue market has seen supply increase on the back of rate and spread stability.
S&P noted earlier this week that triple-A consumer ABS spreads have tightened 2 to 5 basis points at the start of August, despite an increase in supply. “Some issuers will come to market as spreads tighten, offsetting demand effects, in our view,” said S&P. “Exogenous events are more likely to influence structured finance spread movements, in our estimate.”