Silver Lining

The Federal Reserve’s taper talk roiled credit markets in June, and structured finance was no exception.
In his market story, Felipe Ossa takes a look at the impact. He found that on-the-run segments, especially, have held up well. This market has been a big beneficiary of the Fed’s longstanding low interest rate policy, which encourages investors to chase yield. But interest rates are still at historic lows. You make the case that higher yields will deepen the investor base. True, CMBS has been hit pretty hard, but this is one asset class that was arguably getting ahead of itself.
In my cover story, I look at a strategy CLO managers are using to bring deals to market faster: delayed-draw funding.  Loans have been in such demand that it takes time to source collateral. In order to avoid paying interest before they acquire assets, managers get commitments from investors to fund purchases at a future date. Loans have become a little cheaper in the past few weeks, reducing the need for delayed draws. But this has also improved the economics of CLOs. Participants are still calling for issuance to reach the high end of projections this year, $70 billion or so.
Private-label RMBS is benefitting from a number of factors unrelated to interest rates. As our colleague at the American Banker Harry Terris observes, regulators are trying to price Fannie Mae and Freddie Mac out of their dominant market shares by increasing guarantee fees.
John Hintze looks at another development in the RMBS market: efforts to clarify the responsibilities of servicers and trustees for policing bad loans. Some of this will be determined by the outcome of ongoing lawsuits and some of it by sponsors of new deals. 
In Europe, where the securitization volumes have lagged behind the U.S., participants have more than the Fed to fear. Karen Sibayan writes that participants are scaling back expectations for CLO issuance after regulators challenged a common interpretation of risk-retention rules.
Nora Colomer was in Brussels for IMNs Global ABS conference; she reports that regulators are willing to work with securitization players, thought the two are still not seeing eye-to-eye on the importance of the market to Europe’s recovery.