No Summer Slowdown Here; U.S. SF Issuance Posts Another Impressive August, at $45bn (Manzi)
U.S. securitization issuance posted another strong August this year, at $45bn across the four major sectors, flat to July. August is historically known as a quieter month in the market due to vacations and the typically slow period leading up to Labor Day, but in 2017, August also stood out with $47bn in issuance, up from $26bn recorded in August of 2016, and $28bn in 2015. New issue volume YTD in 2018 is now $376bn, up about 15% versus $326bn during the comparable 2017 period, and already exceeding full year 2016’s total of $372bn! All four major sectors remain up y/y, with CMBS closest to last year’s pace, up just 2%.

ABS issuance did slow down a bit m/m in August, to $17bn, from $23bn in July. Auto loan ABS contributed $7bn, split between $4bn subprime and $3bn prime. Cards added $3bn, while commercial ABS (equipment, fleet, floorplan) and non-traditional ABS added ($2bn) each, and student loans and personal loans accounted for the rest, at a little over $1bn apiece. We recently published two interesting pieces on the auto and student loan sectors, both of which have posted issuance growth thus far during 2018. Click here to read “Using Pool Factors to Analyze U.S. Subprime Auto Loan ABS Credit Losses,” and “As U.S. Student Loan Debt Bubbles Past $1.5 Trillion, Federal Lenders Are Pressed To Get Borrowers To Pay Down Their Loans Faster.” Total ABS volume is now $172bn YTD, and our 2018 forecast remains unchanged from January, at $225-250bn.

CMBS printed about $5bn in August new issue volume, roughly $3bn of which was from conduits, and $2bn from the single-borrower side. The YTD total is now $54bn, just ahead of $53bn during the comparable year ago period. Our forecast remains at $85bn for the full year. Single borrower volume continues to run slightly ahead of conduits on a YTD basis, compared to a 38% share in full year 2017 and 28% in 2016.

CLOs showed no signs of slowing down. The YTD new issue total is up 26% y/y to $92bn, which included $14bn in August. CLO refi/resets (which include “re-issues”) totaled $15bn, bringing that YTD figure to $115bn, off 4% versus last year’s pace. We increased our 2018 forecasts for both CLO new issue and reset/refis in July, to $130bn for new issue and $150bn+ for resets and refis. Click here for all recent CLO research; in August we published a Q2 2018 overview and a brief recap of CLO 1.0 performance.

RMBS added $10bn last month, second only to $11bn in June, bringing YTD volume to $57bn, up 30% y/y. Collateral included seasoned CRT, prime, Non-QM, MI risk transfer, RPL, NPL, and a few others. Our full year forecast, unchanged from January 2018, is $80-$100bn, with the lower end of that range appearing more likely at this point.

Pipelines for September generally start to rebuild after Labor Day, although the CLO market did not observe the usual tradition of slowing down the week before... Holidays, the back-to-school season, and IMN’s ABS East conference may provide some breaks in the action during September, although issuance conditions remain favorable. Spreads and rates generally held in during August; the 10yr UST yield actually fell about 10bp during the month. This seems in contrast to what many market participants were expecting, and supports the axiom of my money & banking professor in college: “If you feel you can predict the direction of long-term interest rates, find a dark room, lie down, and let the feeling pass.”

Turning to the numbers … The 10yr Treasury was 2.86%, up 4bps w/w. NYMEX crude oil was $69.88/bbl, up over a buck w/w. The S&P 500 was up 26pts w/w to 2,901. U.S. regular gas prices averaged $2.84/gal. on September 1, flat w/w, down 3 cents m/m, and up 33 cents y/y. The Euro was trading at $1.16, unch w/w. The Freddie Mac survey rate for the 30-year FRM was 4.52%, up 1bps w/w and 70bps y/y. Enjoy your Labor Day weekend, and look for our next email on Tuesday around noon.

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