Ford, Toyota, Cap One inject $4.6B into ABS market
Auto asset-backed securities volume is growing this year, with volumes outpacing last February’s levels to reach $22 billion, a near 60% increase compared with the prior-year period, according to JP Morgan Securities.
Despite predictions that auto ABS volume will remain flat compared with 2019, when it clocked in at $120.9 billion by yearend, according to DBRS Morningstar estimates, issuers bolstered auto ABS volume in February, soaring past last year’s levels.
However, recession risks remain on the horizon for the industry as a slowing economy could “exert undue pressure” particularly if “unemployment surges and wage growth slows,” according to DBRS Morningstar. Still, the U.S. unemployment rate sits at 3.6%, according to the U.S. Bureau of Labor Statistics.
Toyota Financial Services issued the most ABS volume last month, bringing $1.7 billion of prime auto loan receivables to the market. Meanwhile, Ford Motor Credit funneled $1.6 billion in bonds backed by prime auto loan receivables. As for banks, Capital One Auto Finance ramped up ABS volume, injecting $1.3 billion of prime loans, the first issuance of the year for the big bank.
On the lease side, GM Financial takes the top spot for the largest volume with a deal consisting of $1.25 billion in auto lease receivables. Further, Santander Consumer USA issued its first auto lease transaction with $1.1 billion in bonds issued through its Chrysler Capital division. World Omni, too, made its lease ABS debut in February with an $818.5 million deal. Auto lease ABS volume is expected to hit $22 billion by yearend, according to S&P Global Ratings.
As for nonprime loans, Credit Acceptance Corp. brought $500 million in notes to the market. Additionally, American Credit Acceptance and Flagship Credit Acceptance issued $361.5 million and $355 million transactions, respectively.
Credit unions have yet to enter the ABS market this year despite expectations that credit unions, which account for about 29% of total auto loan financing, will be a potential new source of issuance growth in 2020.
