The Canadian asset-backed commercial paper (ABCP) market has continued to grow over the past year, and the sector’s outlook remains stable, says Fitch Ratings in a new report.
The rating agency reports that Canadian ABCP outstandings grew 10% between the end of 2012 and August 2013; and, Fitch says it continues to witness a fair amount of new deal activity in the Canadian conduits that it rates. This growth stands in contrast to the U.S. market, where ABCP outstandings dropped by about 18% over the past year.
“Canadian banks are actively funding core asset classes like credit cards, trade receivables and autos, while residential mortgage transactions are finding favor within certain ABCP vehicles as well,” said Fitch senior director, Kevin Corrigan.
Elsewhere in the world, by contrast, ABCP market participants remain focused on evolving regulatory requirements, which Fitch says makes it unlikely that there will be any meaningful growth next year. “Minimal, if any, growth in outstandings is expected as market participants remain focused on evolving regulatory requirements, the global economic environment and the strength of global financial institutions,” it says.
Fitch has a stable outlook for global ABCP in 2014, noting that this is consistent with the outlook for the global financial institutions that act as support providers to ABCP programs. “ABCP rating actions, if taken, will most likely reflect the health of sponsors, support providers, and other relevant counterparties,” it says.
Over in Europe, the outlook for major European banks is predominantly stable, though institutions in countries experiencing significant financial strain will be under pressure, Fitch says. “Existing European sponsor banks appear committed to maintaining ABCP programs while the pipeline of new transactions has been consistent,” said Corrigan.