Securitisation

After a horrible year for financial markets in 2022, the macro-outlook for 2023 had a lot of consensus views, with most predicting a much better year ahead, helped by supportive rate cuts from central banks and positive returns from both government bonds and credit.  

While European ABS was not immune to negative returns amid the considerable fixed income headwinds of 2022, it gave investors largely what they look to this allocation for – lower volatility and better performance than mainstream bonds. In our view, the forward-looking opportunity looks equally compelling.

We can debate whether the European Central Bank is behind the curve or not, but Christine Lagarde says rates will be in non-negative territory by September.

As we enter the New Year, we say goodbye to an old “friend” that has accompanied us (for better and for worse) since the inception of the UK ABS market in the late 1980s – Sterling LIBOR.

With a student housing CMBS deal recently brought to market, Kevin Law evaluates the sector’s outlook in the aftermath of COVID-19

BWIC – or bids wanted in competition – lists, are a unique characteristic of the ABS and CLO markets, where they are widely used in secondary trading when investors are looking to sell bonds.

Last week, Morgan Stanley successfully brought the first public German Multifamily CMBS deal (HAUS - Eloc 39) to market since 2013. Despite coming to the market in the middle of the summer, the deal has attracted strong demand across the capital stack.

We can model all kinds of credit risk as long as there is enough protection in the structure for investors to get comfortable with a degree of residual value risk.

After a hectic first half of the year, most investors, including us, were hoping for a dull summer to recharge our batteries, but it seems there’s no respite from the CLO machine.

It is quite rare that we recommend playing in the very bottom of the credit spectrum because CCC rated bonds are where at least 95% of all defaults come from, and are significantly more volatile than we would like.

Rates risk is not something we concern ourselves with too much in the European ABS market, so normally news of inverted yield curves and 30-year US Treasury yields dropping below 2% would largely wash over us. This is because pretty much all ABS bonds are floating rate, so there is no duration. Or is there?