Recovery in investor sentiment contributed to a more than threefold rise in net issuance in Europe to $96bn in 2010 from the low point of $26bn in 2009. The US remains the dominant market with 81% of issuance in 2010.
Ratings of US securitisations have taken a much bigger hit than in Europe, with the share of AAA rated securitisations slumping from 81% to 34% in the three years to end-2010, while in Europe AAA ratings have fallen from 85% to 73% over the same period.
The overall US default rate of 7.0% over the three years to Q3 2010 is also eight times that of Europe where the rate is 0.9%.
Common factors around the higher volume of issues sold into the market in the US and Europe in 2010 include collateral with a low risk profile and transparent and simple structures.
Duncan McKenzie, head of research at TheCityUK, said: “Even with basic structures attracting more interest from investors, competing sources of funding, such as covered bonds, and the large overhang of retained issuance are likely to significantly check growth in net global securitisation issuance in 2011.
“Support provided by government or central banks to the securitisation market is being cut back in many countries. This is due to the requirement for central bank funding to support liquidity being curtailed, therefore the volume of gross issuance, including issues retained with banks, is falling.
“In the US the government has signalled its intention to withdraw from its role as a mainstream long term provider of housing finance. Apart from continuing to provide assistance to lower income households, it expects that the private sector will be the primary source of mortgage credit in future and bear the burden for losses.”
