While the setting for Track A’s opening panel of Invisso and AFME’s Global ABS 2024 was familiar, the upbeat mood was perhaps less so. During the event, panellists from across the globe discussed the outlook for markets in America, Australia and Europe.
“US issuance has caught up with 2005,” said Miray Muminoglu, managing director at Lloyds.
Despite European issuance lagging behind pre-GFC levels, market participants struck an upbeat note.
“The amount of paper is really positive,” said Owen Muller, director at NatWest, about the UK primary supply this year. “Non-bank lender origination is starting to come back. We’re going to start seeing a lot more assets coming into the market, which means opportunities for investors.”
Europe’s first ever data centre deal priced in May, and Muminoglu highlighted the number of new issuers, mentioning Molo, Equifinance, Capital on Tap, and Haydock, all of which have priced inaugural deals since the start of last year.
But the panellists warned that the size of investor bases could limit Europe’s markets. Around 90% of investors in UK prime RMBS deals are domestic according to Muller, although the figure is 80% for some buy-to-let trades.
“The dream scenario would be to hear lots of American accents [in Barcelona] next year,” Muminoglu said.
Performance cloud
The panellists identified performance as another risk for the second half of 2024.
“Consumers are already factoring in rate cuts,” said Natalia Joubrina, managing director at Intesa Sanpaolo. “What if they don’t come?”
There has been a “fantastic rally” in spreads this year, said Muller. But he also warned spreads could be reaching their limits, partly due to “political uncertainty” caused by elections, particularly the US presidential election on November 5.
Despite their optimism, the panellists warned that “higher for longer” interest rates would likely mean higher arrears and less supply.
“So far ABS has been resilient,” Muller said.
During the Market Outlook & Performance Review plenary later in the day, panellists said that market performance had been even better than expected.
One said that any deterioration that has happened was caused by “idiosyncratic risks here and there”.
Alexander Batchvarov, managing director at Bank of America, attributed the better than expected performance to strong underwriting, savings from the pandemic and fiscal support from governments.