A couple of years ago, you couldn’t give an Italian ABS away.
That feels like an extraordinary thing to say given a stunning 2024 for securitization in the country. After a series of blockbuster deals in the first half, another three issuers have piled into the market last week. They are big names as well: Société Générale, Santander and Credit Agricole.
When measured in issuance volume, 2024 has been great across ABS so the Italian boom could just be typical of a fair-weather market. When investors are worried there’s a flight to quality and the capital coming into Italy dries up. When investors are confident, they go hunting yield in more exotic locations in the periphery and the Italian market booms.
The juicy spreads on offer are certainly boosting demand at the moment, but from the perspective of securitization the term periphery does the Italian market a disservice.
By volume of outstanding paper, Italy is second of all EU countries behind France. The number of investors involved in deals can stretch into the thirties and clearly some of the biggest names and most frequent issuers are choosing to issue in Italy.
As well as the banks in the market, Toyota choose Italy in February 2023 for its first European ABS. That deal was a runaway success and also the first deal euro to be backed exclusively by financings of alternative fuel vehicles.
It hasn’t just been big names either. Multijurisdictional fintech lender Younited launched a trade earlier this year, as have some local banks.
Hopefully the wave of issuance is the start of something bigger.
It makes sense for asset managers to play in Italy because most ABS ratings are capped at double-A. That subdues the normally large bank treasury bid coming out of northern Europe, resulting in wider spreads.
Look at the book for one recent trade, Mediobanca’s Quarzo 2024 in June. Thirty six investors were allocated, across four tranches. Thirty six per cent of the trade went to domestic investors and 50% went to asset managers. That means asset managers must have bought at least a decent chunk of the class ‘A’ notes which were 86% of the deal.
GlobalCapital has heard investors are growing more comfortable with investing in Italy as they gain more exposure during this year’s bumper crop of deals. It suggests that this wave of supply could be just what the market needs as the Italian market cements its status as one of Europe's brightest.