Although there is a substantial pipeline of ABS deals ready to hit the market after a hectic couple of days in Miami at the IMN and FINN ABS East conference, the return of high rates volatility is making issuers reconsider their fourth quarter funding plans — even as bankers say most issuers should come to market before the end of the year.
There are at least 10 ABS deals waiting to come to market in the wake of this week's conference. And one consumer ABS issuer said that they had met several investors at the conference who were excited to put more money to work in the sector over next few months.
But others say they are focused on the first quarter of 2024 instead of rushing in this quarter.
Wednesday was another rough day in US rates markets, with the two-year Treasury 6bp wider on the day, the five-year 7bp wider and the 10-year 12bp wider.
Yet some see compelling reasons to push ahead with issuance. One ABS issuer told GlobalCapital that, in these conditions, it was impossible to try to time the market. Rather, it is now a case of finding the first window of opportunity.
“The window should be open once we get back [from ABS East],” one ABS syndicate banker said. He added that November and December would be difficult months to issue as investors start to retreat to the sidelines at the end of the year.
Moreover, bond markets are pricing in another 25bp rate increase from the Federal Reserve. Waiting may therefore be expensive.
For amortizing assets like auto, the best time to issue is now, according to another head of ABS syndicate. However, sectors like aviation would benefit from waiting for rates to stabilize, they said.
In the spirit of taking advantage of windows, a third ABS syndicate banker said he had been telling issuers that they should still look at the market as late as December if they are able to.
However, one ABS trader told GlobalCapital that ABS spreads would need to widen further across the board for investors to be interested at this stage of the year.