Recent data regarding consumer credit--especially auto ABS collateral data--are showing signs of deteriorating performance. Moreover, we've seen some indication that consumer distress is spreading to higher credit score and income cohorts, despite a relatively low unemployment rate. An unforeseen increase in the unemployment rate over our base case could lead to further distress for consumers who are already facing a myriad of financial challenges. We deep dive into the data and detail more of our observations and what we’re attributing this to.

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• Inflation and Affordability Challenges Remain For Consumers Despite Low Unemployment

We discuss the cross-sector impact of the Los Angeles wildfires on California's property insurance, housing finance, and state creditworthiness. As the wildfires are expected to result in substantial losses for insurers, we discuss how carriers are expected to raise rates and/or reduce coverage options in California and other at-risk areas; and how the FAIR Plan, an insurer of last resort, could exacerbate that. We also detail how the fires could cause downward pressure on home prices in California’s housing market. Finally, we discuss how the rising insurance costs and mounting affordability challenges could weigh on the creditworthiness of the state of California over time

Since CLO ETFs launched in late 2020, the investing landscape has changed, as retail investors can now access securities previously available only to institutional buyers. Driven by strong investor demand, CLO ETFs have injected new liquidity into CLO primary and secondary markets. We discuss what’s fueling the rise of the CLO ETF sector, its portfolio compositions and purchasing activities, and the extent to which these ETFs can impact CLO tranche pricing under certain economic conditions.

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• ABS Frontiers: How The Burgeoning CLO ETF Sector Could Impact The Broader CLO Market

We’re joined by esoteric ABS credit analyst Christine Dalton to do a deep dive on the Nov. 4, 2024, downgrade of TGIF Funding LLC’s series 2017-1 class A-2. We look back at the deteriorating operating performance of TGI Friday's casual dining restaurants, the impact of the COVID-19 pandemic, increased securitization expenses following the manager transition a (manger termination event was declared on Sept. 5, 2024), potential disruption stemming from TGI Friday's Inc.'s bankruptcy filing on Nov. 2, 2024, and the virtual certainty of a payment default over the next 12 months.

After two years of muted issuance, the U.S. BSL #CLO market has roared back to life, with about $165 billion in issuance to date. We’re joined by CLO Sector Lead Stephen Anderberg to discuss what’s driving this active market (e.g., benign credit outlook and continuing strong demand for high-quality floating-rate assets), where we think the market will end up at the end of the year, and the status of refinancings and resets, specifically. Leveraged Finance Sector Lead Minesh Patel also joins us to discuss the factors driving our generally positive view of Corporate credit performance over the next 6-12 months (e.g., policy interest rate normalization to help stick a soft landing, generally healthy balance sheets, etc.).

We’re joined by analyst Casper Andersen to provide updates on the Norwegian, Finnish, and Dutch covered bonds markets, and Icelandic jurisdictional support. We discuss the current housing markets and economic growth for Norway, Finland, and Netherlands and the impact on their respective covered bond markets. We also discuss issuance demand and trends in the Dutch covered bond market and revisions to certain jurisdictional support assessments in our criteria (specifically Iceland).

Related Articles:

• Covered Bonds In New Markets: Issuance Holds Up In 2024
• Global Covered Bond Insights Q2 2024: Strong Start To The Year For Issuance
• Covered Bonds Primer
• Norwegian And Finnish Covered Bond Market Insights 2024

For our first episode in 2024, our host, Tom Schopflocher, is joined by Cian Chandler, S&P Global Ratings’ Global Structured Finance Chief Analytical Officer, to introduce our “ABS Frontiers” article series. Throughout this year, these informative commentaries will explore sectors that are somewhat “out of the ordinary,” which, in addition to being interesting and possibly not broadly understood by the market, show potential for growth in origination and securitization. Some asset classes we’ve published on so far include C-PACE, music royalties, private credit funds, and bridging loan RMBS.

In the episode, we discuss our reasons for embarking on this article series, which include providing market insight based on what we are seeing and what may come down the line.

Click on the link below to access the series:

• ABS Frontiers Series

In 2022, European covered bond issuance reached levels unseen since 2011, with the French and German markets leading the way. We're joined by analysts Denitsa Carouget and Casper Andersen to discuss both of those markets. We provide overviews of both French and German covered bond markets, including relevant legal frameworks and recent market developments. We also go into how both markets are performing in “higher-for-longer” interest rate environments and discuss our forward-looking outlooks.

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• French Covered Bond Market Insights 2023
• German Covered Bond Market Insights 2023

We're joined by analyst Ana Lai and co-host Jim Manzi to discuss the global office sector’s uneven recovery post-pandemic. We dive into the vacancy rates in different regions around the world, pricing trends for the office sector in a higher-for-longer" interest rate environment, and office performance in relation to the CMBS market. We also discuss distributions of North American REIT debt maturities across commercial real estate sectors, especially for the office sector, and what that means for the market. Finally, we touch on our outlook for the U.S. office market going forward.

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• SLIDES: Uneven Global Office Recovery Is Squeezing Credit Quality

Analysts Daniel Hu, Rebecca Mun, and Abhijit Pawar join us to discuss U.S. and European BSL CLOs. First, we give a recap of a CLO panel at a recent S&P Global Ratings-hosted European Structured Finance conference, "Navigating Challenges; Seeking Opportunities," where amendments and extensions were a focus. We then deep dive into a comparative overview of U.S. and European BSL CLOs, going into specific similarities and nuances between CLOs from both markets.