Asset-Backed Securities Quarterly Update – April 2024

Douglas Charleston, Partner & Portfolio Management, concludes the first quarter in 2024 for the Asset-Backed Securities team, noting that while major economies remain resilient, the rates markets have undergone significant shifts, with central banks reassessing their rate cut expectations. Will the cuts occur before June, or will they occur later in the year? 

Key takeaways: 

• Rate cuts: Markets have revised the number of major central banks’ cuts expected in 2024 to three
• Credit spread tightening: Spreads tightened almost universally, though in some areas such as European high yield and investment grade, they tightened to uncomfortable levels
• Significant primary issuance: Despite an unseasonably quiet February, there was €25bn of primary issuance across the quarter
• Portfolio diversification: We increased our diversity in portfolios, with investments in new CLO managers, Australian ABS and significant risk transfer (SRT) transactions
• Outlook for Q2: The second quarter is expected to be more range-bound, with what are likely to be pivotal central bank meetings scheduled for June