4/25/2025
Hello and thank you for reading the first ever edition of Freshly Squeezed ABS, my newsletter on all things European securitization. The idea behind it is simple: You read this every Friday, safe in the knowledge that behind the light-hearted fun I desperately try to have, all the major stuff of the week is here and you’re up to date for when Monday rolls around again.
At present, this is very much a “soft-launch” – but don’t forget to subscribe here to get this directly to your inbox once the full launch is ready!
Crisis? What Crisis? Clearly those of us who thought the sudden silence in European ABS meant we’d be back to a 2022-style market of fits and starts were wrong.
Last week’s deals from Mercedes (Silver Arrow 19) and Balbec (PRPM Fundido) started the resurgence, but the macro-noise hasn’t gone away. Nevertheless, Santander managed to price its €700m German Consumer ABS, SC Germany SA Compartment Consumer ABS 2025-1, while three other deals hit screens, aiming to price next week.
Silver Arrow 19 certainly was seen as a good thing for the market as a whole, getting away well despite wider volatility in stock markets and government bonds.
And so with two deals priced before the Easter weekend, one the week after and at least three more to come the following week, it all of a sudden looks like the early April silence was just a collective rush to Courchevel for the last of the season’s snow. And, crucially, not a sign of panic.
But there is still a slightly odd whiff in the air. Some investors are rightly nervous about the worrying signs coming from stock markets, bond prices, and wars of varying kinds. Yet as soon as the weather turns and we get a 4-day weekend, suddenly, those fears have melted away…?
Well, somewhat. It’s clear that spreads are drifting wider. Santander’s SC Germany Consumer ABS was a phenomenal effort, tightening from IPTs of 80bps on the seniors down to a final 73bps is brilliant, all things considered. But looking at comparable deals, it’s still about 5bps wider than the rough Q1 average.
Most would expect the widening to continue gradually, while probably not hitting the extremes of the LDI crisis, Covid and so on. But overall, it feels as though a consensus is yet to emerge on what all the macro noise means for securitization.
As mentioned, you have the heightened volatility in other markets and some economists predicting a recession. But on the other hand, asset pools are performing within their normal range, and not much has really happened – yet.
There’s also a lot more capital needing to be deployed in European ABS compared to years gone by. For a while now, this has been a market with too much cash and not enough deals, and that technical hasn’t really shifted – as the final subscription levels on SC Germany Consumer showed.
For now, many are quite sanguine about the macro factors. With a deeper investor base, the market can find a level and deals can still get done. Prime deals like Silver Arrow coming along help set a positive tone, and eventually open the door for other asset classes as well.
When it comes to specialty lenders though, there is more hesitancy – no one wants to go first. But pricing should still be around 85bps for AAA-rated BTL paper, a far cry from a couple of years ago where 100bps or more was at times normal.
Next week, more deals are expected to be announced, and it will be useful to see how the three of RCI Banque, BMW, and Compass Banca get on to understand if investors are still happy to play ball.
Expect to see funkier asset classes heavily pre-marketed until that consensus and confidence is found.
Meanwhile in regulation world, there’s been a dizzying amount of updates in recent weeks, and I’ve certainly found myself asking whether any of them matter since the European Commission is to release a big batch of proposals in the summer.
For this week, I thought I’d focus on the latest reports from Paris Europlace, the trade association that represents the French financial markets. There are two reports (links below). One focuses on the Liquidity Coverage Ratio (LCR) and the other on how covered bonds and ABS can actually be complimentary.
They’re free to read, and explain things better than I can summarize them. What I wanted to highlight was their significance.
The Commission is expected to begin its internal circulation of its draft proposals on EUSR reform on May 6, with publication of the final proposals in mid-June. Reports like this are a sign of how the lobbying efforts are now shifting away from the Commission and towards the European Parliament. And they also tell us what the key battles will be.
LCR, as we all knew from the beginning, is the least likely reform to get over the line. And if there’s any hope of doing it, a lot of MEPs who don’t understand the intricacies of the capital markets will need to be persuaded that securitization is not the harbinger of doom.
It will be interesting to see if other reports start coming (I’m sure there are many I’ve not yet seen), that take on a similar, simplified/debunking approach from now on.
Paris Europlace Report on LCR – Click Here
Paris Europlace Report on Securitization and Covered Bonds – Click Here
With this being my first newsletter, things are liable to move around, but I would like to do a little update each week on what I’m doing/thinking about that’s really not ABS. Essentially, an excuse to talk golf or football.
I’ve been writing little draft versions for the past few weeks and in this section, I was making loads of Arsenal-related jokes following their thumping Champions League win v Real Madrid. Sadly, it’s a bit late for those now. Those will have to wait for next week when yet another team is put to the sword by the greatest number 9 to ever live, Mikel Merino.
And while I do have a golf match this weekend, I will instead use this final word to ask (beg) for your feedback on the newsletter. I want it to be useful and fun, and I want the balance to be right, so please do get in touch with your thoughts – things you like, things you don’t and things I should try and include.
And once again please subscribe here: https://tally.so/r/3EAbXL
Thanks for reading, until next week!
Tom
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