3/9/2026
War in the Middle-East is upon us again. Stories from friends in expat hotspots like Dubai and Abu Dhabi bring home just how terrifying it must be for all civilians.
How long this intensity of conflict will last, no one really knows. But as far as ABS is concerned, it was a week that threatened to seriously challenge the market’s momentum in a way not seen since Russia’s invasion of Ukraine back in 2022. It’s worth remembering that it still can, as oil prices this morning have shown.
Monday and Tuesday were eerily quiet in the markets last week. So much so that some market participants didn’t even bother with deal discussions until a clearer picture of the conflict became apparent. Yet despite all that, three ABS trades that were initially caught out by the conflict were able to price on time, while by Friday another Italian consumer ABS from Santander hit screens.
It suggests that investor conversations have not been too focused on developments in Iran so far. In addition, a fair few CLO trades were priced as normal, which can often be a quicker indicator on the state of market confidence than ABS. And of course, I suppose you’ll be somewhat less concerned about inflation and oil prices if your bonds are floating rate – a rarity in the European capital markets as well.
All in, it means that European ABS retains its status as a safe-haven, providing insulation if not immunity from macro and geopolitical noise.
Nevertheless, it was fairly surprising to see the standout deal of the week come in sterling with its shallower, less diverse investor base to rely on when times get tough. Yet Propel Finance’s debut Lease ABS, the £306.6m Velocity 2026-1 passed through the storm with flying colours.
Maybe it shouldn’t be a surprise considering that before events in the Middle-East, UK collateral was going very well indeed. With eight deals already priced for a combined figure of around £3.8bn, just £500m shy of the Q1 2025 total, there was clearly appetite for UK ABS if concerns over Iran could be overcome.
With all of the above under consideration, IPTs were cautious. There was a bit of a pickup versus the last Lease ABS from Hermitage back in June last year on the seniors and as much as 40bps further down the stack. But as the Auto ABS market has tightened a solid 10bps since then, the pickup was in reality a fair bit more conservative than it first seemed.
But as has so often been the way in the last 2 years, cautious IPTs often lead to bumper demand and multiple rounds of tightening. And so it was here.
All tranches were at least 2.2x covered with the BB-/BBB- tranche 5.7x oversubscribed. In the end, the seniors priced just 1bps wide of Hermitage at 88bps over Sonia, while the largest pickup came in the Single-A tranche, 15bps wide at 155bps over. A very strong result after an extremely challenging week.
Meanwhile, two Italian ABS trades battled through the geopolitical storm to get good results in euros.
The first came from Hyundai, launching their second ever Italian Auto ABS, the €560m Fulvia Series 2026-1. Hyundai is fast establishing itself in Autos with its sixth deal in less than three years (four German deals from the Pony brand and two Italian from Fulvia). The Korean carmaker’s progress has mirrored that of auto collateral in general, the sector by far the most active in European ABS since 2023.
But in addition to events in the Middle East, Hyundai had to deal with a lack of ECB-eligibility for its senior tranche thanks to the latest amendment on residual value risk from the ECB. I wonder whether this could become an issue which creates almost a two-tier market in autos. Read this snapshot report from law firm Jones Day to learn more, here.
However, as the week went on, so did the confidence of Fulvia’s leads. Books hit a combined €900m of demand at final guidance, the deal priced aggressively even as the war raged on in Iran. The final Class A1 amount came in at €418.6m – well north of the minimum €299m initially targeted for full marketing. A more than respectable end to a testing few days.
It was a similar tale for Agos’ €1.2bn Consumer ABS, Sunrise 98. A leading figure in Italian consumer ABS in a market that has boomed in recent years, on the day of launch this deal was a formality. And those sentiments don’t disappear overnight.
Less activity does not automatically equate to spreads widening out, and with time, conditions appeared to be returning to its previous state of a strong seller's market. After a few updates and rounds of tighter guidance, Classes A-E were 2.1x, 2.8x, 3.8x, 4.1x and 3.0x covered, respectively.
Sunrise continued to get bids despite the tighter guidance and demand was strong, allowing for significantly tighter prints versus the most recent comparable from Younited back in November.
As for this week, there’s a number of deals in the pipeline having taken a week off to reassess following the strikes on Iran. But the arrival of Santander’s Italian consumer Golden Bar suggests investors are still engaged.
Ultimately though, with oil prices surging to $119 a barrel overnight, I think we could be in for another few days at least of “wait and see”.
I’m afraid while one member of the Lemmon family successfully reproduced two weeks ago, another’s gift to do so has been cruelly taken away.
Poor Chewie, my Golden Retriever, had to be neutered for medical reasons on Tuesday. And he has not taken to it particularly well. The first stage is in some ways easier for me and his mother, for all he did was look miserable, sleep, refuse food unless it was fed to him by hand and struggle to pee.
We are now into the second phase, where Chewie believes himself to be invincible once more and doesn’t understand why he has to have a stupid donut around his neck and cannot go for a walk off-lead.
In addition, he seems to enjoy spinning around the bed in circles at night, like some sort of 30kg Catherine Wheel. While he also has a peculiar talent for devouring the ham, chicken, salmon, peanut butter I give him while simultaneously managing to spit out the tablets hidden inside.
I’ve got about 4 days more of this to go… Hope your week is better than mine,
Tom
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