Credit performance managed to improve slightly in European structured finance transactions in 1Q10 as the number of upgrades rose for the first time in several quarters, according to Standard & Poor's.
Despite rebound in positive rating actions, S&P mentioned that upgrades were still heavily outnumbered by downgrades, i.e., 151 and 1,155 in the last quarter. S&P expects the European economic recovery to remain relatively sluggish and fragile in the near term.
In consumer and credit card ABS, unemployment growth remains a key driver. In RMBS, low credit availability is an additional factor constraining significant improvements in borrower performance. In structured credit, S&P believes the easing of financial pressure on corporate credit ratings should help stem the flow of downgrades.
In the CMBS sector, despite lower pressure on market rents while interest rates edge up, the outlook remains overshadowed by the imminent onset of a significant refinancing burden