ABS

The two-year U.S. rate, which is the most sensitive to monetary policy, slid for a fifth day, its longest streak since July 2022. Economists now assign a 65% probability of a U.S. recession.

Moody's had lowered the residual value loss a full percentage point, but did not mention whether it would lower the credit loss expectation.

Traders flocked to shorter-maturity Treasuries, driving two-year yields down 18 basis points at one stage. The 10-year note's rate was 1.5 percentage point lower than the 3-month T-bill.

Traders got another taste this week of the contrasting forces battering the market with bonds falling after a surprise cut to global oil production, only to bounce back hours later following weak economic data.

Initial hard credit enhancement for the class A notes is lower, at 37.30%, because of lower subordination in the deal.

Despite some signs of weaker performance, metrics remain within manageable levels, and credit enhancement appears to be sound.

The bonds are initially being marketed at a heavily discounted price of 78 cents, bringing the all-in yield to roughly 14%

The five-year notes benefit from overcollateralization equal to 35%, and will use the proceeds to repay a line of credit facility.

Some sponsors are selling only AAA or investment grade ABS and retaining the riskier assets, as one way to cope with escalating interest rates.

HART 2023-A has a yield supplement overcollateralization amount (YSOA) of 10.11% as a percentage of the aggregate pool amount of $1.4 billion. It was 10.76% on HART 2022-C.