The ABS sector saw a massive surge in new issue supply in 2024 as stable interest rates, tight labor markets, and a growing economy led to a rise in consumer and commercial loan and lease origination volumes. The ABS primary market also benefited from structural tailwinds in the form of increased bank issuance in response to new capital requirements, as well as rising insurance company demand for higher-yielding ABS debt products to match their growing policy and annuity volumes. With November’s Federal Open Market Committee (FOMC) meeting marking the second rate cut of 2024—coupled with our expectation for further economic expansion in 2025—we expect ABS new issue supply to continue to rise in the year ahead.
In terms of credit fundamentals, the ABS market remains on stable ground, although some pockets of weakness exist. With 60%-70% of the ABS market directly backed by U.S. consumer loan and lease products, the strength of labor markets and household balance sheets have the largest…