Consumer-focused Asset-Backed Securities (ABS) has the support of tight labour markets and strong household balance sheets. But there are risks ahead.
Watch Out For Delinquency
Given the widening in corporate credit-risk spreads since February, consumer-focused ABS is gaining the interest of professional investors.
Given a backdrop of strong labour markets, nominal wages, and solid household balance sheets, there is clearly support for consumer-related segments of the ABS market, such as auto loans.
The unknown risks are how inflation and rising rates will impact future absolute levels of delinquency.
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