Consumer ABS are probably going to be a higher-velocity market going forward given their shorter average-life profile, according to a presentation released this morning from Wells Fargo analysts.
Roughly 47% of the bonds issued thus far this year have average lives of less than two years, they reported. Analysts estimated this measure to be at less than 20% of the market in 2007.
They also changed their projection for ABS issuance upwards based on higher auto ABS volume. Wells Fargo analysts now estimate new-issue ABS for 2012 to reach $139 billion, which is up from $115 billion. Last year's issuance was just $107 billion.
Analysts suggested that investors go down in credit in ABS instead of extending duration to pick up added yield. They added that credit fundamentals are still strong with low delinquencies and losses.
Analysts said that principal paydowns, faster turnover and a more concentrated market in autos might have implications for ABS demand and spread levels.