Highlights

  • Consumer asset-backed securitized (ABS) sectors should continue to face headwinds as consumers feel the full impact of the dramatic economic slowdown ignited by the COVID-19 outbreak.
  • Unemployment has increased, which could impact the ability of borrowers to make loan payments on everything from autos to credit cards, and will have implications for the securitizations underpinned by these obligations.
  • We may not see these impacts manifest in the numbers until remit reports for March are available in late April, but we are already hearing anecdotal evidence from our issuer relationships that consumers are reaching out to discuss payment extensions and other potential remedies.
  • We believe that the investment-grade-rated tranches of most securitizations can withstand the stresses created by extensions, deferrals and outright defaults.
  • Patience is warranted in areas like consumer credit and transportation-related assets.
  • There are pockets of the consumer ABS market that we are watching, such as refinanced student loans, which tend to have a borrower base with more stable income and are attractive from a valuation perspective.

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