Surge in ABS Issuance As U.S. Election and FRB Meeting Approach

Banks are ramping up ABS issuance with the approach of a Federal Reserve (FRB) meeting and the U.S. presidential election, two events that may unsettle markets, according to a recent Financial Times article.

Immediately prior to the ABS East conference, new supply hit its highest weekly level since September 2014, according to data from S&P Global Ratings. As the Financial Times reports, approximately $19 billion of U.S. ABS were sold in the week of September 16th, including $13 billion of securities backed by auto, credit card and other consumer product loans.

The FRB left interest rates unchanged after meeting last week, and traders and investors now bet the U.S. central bank will lift rates at its final meeting of 2016, according to the article.

“The ABS market is on fire,” said James Shepard, co-head of investment grade debt capital markets at Mizuho. “Whatever upsets this market is unknowable. We point to the presidential election, but that is probably a bump in the road. Something that completely reverses things has yet to be determined.”

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