Securitization

Douglas Charleston looks at the wider implications of recent bank sector volatility and the opportunities it presents for credit investors.

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.

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.

With inflation and rate hikes dominating market discourse, we expect floating rate assets such as ABS and CLOs to benefit from increasing demand in 2022.

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.

Eoin Walsh explains how bond investors can use the three dimensions of credit – amount, quality, duration – to help maximise or protect returns through different stages of the economic cycle.

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.