Figure 1: Year-to-date new issue volumes – 2023 vs. 2010-2022 average
- During September, the primary pipeline in asset-backed securities (ABS) swelled – adding approximately €11bn to the issuance tally year-to-date (YTD) across more than 20 deals (at time of writing).1
- It was dominated by residential mortgage-backed securities (RMBS) and the auto sector, which are the two largest sectors of the market. In addition, collateral pools from four jurisdictions – Germany, the Netherlands, Spain, and the UK – provided investors with further diversification opportunities.
- UK prime RMBS issuers have returned to the market after a prolonged Bank of England (BoE) funding schemes (such as the TFSME2 ) have provided cheaper financing options in recent years.
- However, with RMBS pricing looking more competitive vs. covered bond levels, and central banks pulling back on funding, we can likely expect higher levels of issuance from bank and building society issuers returning to the market.
- Following a period of low issuance volumes in CLOs3 due to a challenging arbitrage (the differential between the cost of liabilities and what the assets are paying) and a quiet loan market providing fewer investment opportunities, the pipeline for the remainder of the year is looking up with a range of familiar names and inaugural managers.
1 J.P. Morgan International ABS & CB Research, as at 25 September 2023.
2 TFSME: Term Funding Scheme with additional incentives for Small and Medium-sized Enterprises.
3 CLOs: Collateralised loan obligations.