U.S. ABCP Volume Shrinks 18% YTD

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The U.S. ABCP market remains on its path of decline, with total outstandings falling 18% so far this year, according to Fitch Ratings.

Sucking the air from the sector are regulations.

At Nov. 13, there was $248 billion of U.S. ABCP in the market, an 80% plunge from July 2012 peak of $1.2 trillion.

“ABCP conduit sponsors have been keeping busy proactively preparing programs for operations in the new regulatory environment,” said Senior Director Kevin Corrigan. These include amending programs so different kinds of ABCP can issued, including paper that is either callable or putable or carries an option for investors to extend the maturity.

These would help sponsors deal with more stringent liquidity requirements.  

But attempts to adapt to the new regulatory world have apparently not arrested the sector’s long decline.

The agency’s rating outlook on U.S. ABCP is stable for 2014, reflecting its view on U.S. financial institutions.

In contrast to the U.S, the sector in Europe is growing, with ABCP outstandings at $45 billion at Oct. 31, a 29% growth from the $35 billion posted on Oct. 31 of last year. As in the U.S., regulator uncertainty is affecting this market, but Fitch said sponsors are expected to maintain their programs as a way to keep their funding sources diversified.

Canadian ABCP is also seeing growth, with outstanding volume rising 10% in the year through Aug. 31. “Canadian banks are actively funding core assets like credit cards, trade receivables, and autos,” said Corrigan. What is more, some assets are longer-term, with residential mortgage deals also being funded by some vehicles, he added.

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