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Now even the European Central Bank is having a go at the poor ratings agencies for having the wrong opinions on ABS ratings. More investors should be taking the decision into their own hands, but to do so they need greater transparency. -
Football might not be coming home this year (although it depends who you ask, and in the spirit of our new name, GlobalCapital should probably sit on the fence in that debate) but securitization definitely did. Barcelona became the capital of Collateralunya once again this week — and some of the city’s residents received an unexpected windfall in time for the World Cup.
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The ECB’s announcement on Thursday that it will look into outright purchases of simple asset backed securities wasn’t exactly a big bazooka for Europe. But it was an important step and could be a defining point in the securitization market’s history. The bazooka might not have been built yet, let alone fired, but the ECB is at least designing it so that it will work properly.
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It’s a classic moral panic for the UK broadsheet newspapers. ‘Government housing policy fails’ scream the headlines. ‘Paltry take-up for social housing aid’.
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Most of the time, it’s much easier to deal with new leverage than getting rid of old leverage. That’s something the US CLO market would do well to remember with lead managers said to be placing new CLOs with hedge funds that are taking down senior tranches, provided they can do so, up to 9x levered, making the 150bp spreads on offer look a bit more exciting.
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The CLO market is ready for more supply and ripe for innovation, but that optimism is tempered by threats of a liquidity crunch in non-Volcker-compliant triple-A paper. The market is hoping for a deal on legacy CLOs to stop a trading freeze, but if that doesn't happen, it needs to wake up to two uncomfortable truths.
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The CLO market is ready for more supply and ripe for innovation, but that optimism is tempered by threats of a liquidity crunch in non-Volcker-compliant triple-A paper. The market is hoping for a deal on legacy CLOs to stop a trading freeze, but if that doesn't happen, it needs to wake up to two uncomfortable truths.
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Originate to distribute, the business model oft quoted as one of the primary causes of the subprime mortgage crisis in the US, and by extension, the rest of the financial crisis, is back. But this time it’s different, apparently, or at least backwards.
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Capital requirements ought to be the soft padding that lets the market bounce around without doing any damage. But when they are too high, capital requirements, rather than economics, set the price of a security.
