5/2/2025
Thanks once again for reading the latest edition of Freshly Squeezed ABS, I shall selfishly take the opening line to remind you to subscribe to get the newsletter straight into your inbox – here.
This week, in my life as in European ABS, feels to be epitomized by the virtue of patience.
Often we think of patience as the opposite to recklessness or impulsivity. But when considering it under Aristotle’s virtue ethics, it sits more in between two vices. On one side, the vice of excess (in this case, recklessness), and the vice of deficiency (inaction). And fighting both vices will continue to be themes in the market over the coming months. As for me and my life, I will patiently wait another week before talking about Arsenal’s European dream.
Anyway, when it comes to fighting the vice of deficiency, at first glance, that really doesn’t look like European ABS right now.
As my old pal from GlobalCapital, George Smith, wrote (here) last week, we have Mercedes to thank for the growing confidence in the market.
That led to three deals in the pipeline at the start of this week, and roughly €2bn of AAA paper to be sold. I said in the first Freshly Squeezed (here) that BMW, RCI Banque and Mediobanca would give us a good idea of investor sentiment, and the message was pretty emphatic.
All three deals priced and tightened on the seniors, with upsizes from BMW and RCI Banque on their Auto ABS deals. Mediobanca’s Quarzo 2025 also reduced the protected interest allocation.
So, what does this have to do with Aristotle’s virtues? Well, I would say we’re seeing patience and bravery being rewarded.
Many deals were planned for April and they haven’t hit screens. And I understand many asset managers in particular, went from being active participants in ABS to suddenly preferring cash in light of the broader market volatility.
But the issuers of the last couple of weeks saw that a market was still there, albeit 5-10bps wider than it was in March. And they saw as well that asset managers were back to play ball.
It’s an awkward time with European bank holidays on May 1st and the UK version this coming Monday, but there’s also no time to waste.
The market is pretty close to normal, even if the world is a more volatile place. And more importantly, Global ABS is just around the corner. And after that people are on holiday, and before you know it, it’s September and there’s a whole new rush. Deals need to get done now. Capital needs to be put to work now.
Someone said to me this week that it’s important to not try and be a hero. Those extra 10bps in March might come back, they might not. But in the grand scheme of things, this is still a good time to issue and they have railed against inaction and been rewarded.
Meanwhile, on the other side of the Aristotelian coin, we have the vice of excess. Can you hold it all in and show some self-control when needed?
Well, I think we see great evidence of that with Plata Finance’s Asimi Funding 2025-1, which is due to price any second now.
On April 1st, Plata Finance brought its second ever consumer ABS, with the aim of pricing the following week. And then of course, all hell broke loose. Some predictions had the secondary market blowing 40bps wider as broader market volatility silenced European ABS primary.
Led by Barclays and Jefferies, Plata Finance put the deal on hold. And they waited and waited before finally set for pricing today (May 2nd). It looks set to beat the inaugural 2024 Asimi deal on the seniors by 5bps at 95bps over Sonia, while the class B’s are only 5bps wider.
And it’s worth remembering that back then, Concept ABS said it was “unequivocally a seller’s market”. The conditions have clearly changed, and all in, this has been a very solid result.
Next week, UK RMBS is gearing up for a return with Paratus AMC’s second edition of Braccan and Pepper Money’s Castell. If Braccan in particular goes well, I think that will bring a lot of confidence to the market. It’s a mixed pool of buy-to-let and owner occupied mortgages, which puts it on the funkier end of the RMBS scale.
But if investors are lapping that up, many will feel the market really is back to normal. Whatever that is these days.
Expect to see a busy May overall. I hear of 3 or 4 more in the UK BTL RMBS area, and a few UK Prime RMBS too. But remember that we’re not out of the woods by any stretch.
As promised, no Arsenal talk. But may I interest you in some golf-related mindfulness?
This week’s theme of Aristotle’s virtues got me thinking about how my approach to golf has changed in the last 12-18 months – and how that might help some of you fair-weather golfers as summer starts.
I became a single-digit handicapper a few years back, but after breaking my ankle playing football, I messed around with my technique (unknowingly) and had a really tough couple of years. At one point, I was considering giving up golf.
I was still playing competitive matches against similar level players (around 6 handicaps), but it wasn’t at all enjoyable. I was hitting shots designed to not go wrong, rather than designed to be a good shot.
So, last year, after finally fixing my technique, I’m down to a 6.0 handicap, which would put you in the top 25% of all amateur golfers – so not bad at all. This summer, my aim is to get down to 3.0, which would be top 6-7% of golfers.
But my secret weapon this year is my mentality.
Golf for me is a brilliant way to forget about securitization and ARC and my CEO and my colleagues and even my fiancé and my puppy. It’s just me walking amongst the trees, having a nice time.
It’s about enjoyment. And now, I’m really trying to embody that. Enjoy the shot, enjoy the tough chips and putts. Enjoy that you’ll lose sometimes too when a bandit has the day of his life (for the second time that month).
As a result of this, I’m playing better and winning more matches. And most importantly, being out there feels relaxing rather than draining.
So, if you’re a golfer looking forward to the sunshine during a round over the next few weeks, bear it mind. I don’t mean that you shouldn’t care about your shots. Take your time to think about what the right shot is, but then when you’re standing over the ball, commit to it with freedom and lightness in your grip. You’ll have more fun and you’ll play better too.
Committed, but not clenched. Thoughtful, not tight.
Thanks for reading – And once again, please sign up to the newsletter to get it straight into your inbox when we’re ready with our email version: here.
Enjoy the long weekend.
Tom
© 2025 ARC Risk Models Limited
