With recent macroeconomic and geopolitical events, including Brexit, new questions have cropped up and market participants have been on the lookout for clues as to how the industry moves forward from here.
Brexit has caused uncertainty in many markets, and because auto ABS paper has a relatively short maturity, the effects of Brexit remain to be seen.
Negative interest rates in Europe have attracted more investors into the European auto ABS market.
The U.S. consumer finance market has come a long way since the depths of the global financial crisis. By most metrics, the market has not just climbed back to the peak, but is continuing to rise to new heights. Asset Backed Securities (ABS) has become a key part of that ascent, as lenders look to extend both secured and unsecured consumer credit. Growth policies under the new U.S. administration could affect specific consumer ABS sectors.
As 2021 fast approaches, the burning question of what indices will replace LIBOR (London Interbank Offered Rate) comes to the forefront. LIBOR scandals have caused the creation of alternative indices options. The impact to the Asset-Backed Securities (ABS) market could be significant as there are billions of dollars of residential mortgage loans in the U.S. that are tied to LIBOR.
