News Digest: Widening spreads stymie asset-based securitization yields

April 19, 2022

News Digest:

A sharp rise in benchmark rates could be making the securitization market inefficient. Securities Industry and Financial Markets Association shows a 45% drop in asset-backed securitization to $79.4 billion in Q1 2022 over a year ago.



Analysts believe that several reasons could have contributed to the drop, including a decline in consumer demand for loans. However, the main reason could be on the investor side over worries around the war in Ukraine and the rising interest rates. Investors are seeking higher returns from companies than they can easily afford.

Spreads are already widening as seen by the 3-year triple-A rated bonds supported by auto loans with prime credit scores. Spreads increased by 0.33 percentage points between February 3 and April 7, while they stood at 0.5 percentage points on triple-B bonds backed by subprime auto loans.



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