Bolstered by a recovering economy, the credit quality and performance of the Canadian asset-backed securities sector will remain strong in 2015, says Moody’s Investors Service in a new report.
The rating agency says that asset-backed securities (ABS), residential mortgage-backed securities (RMBS), and covered bonds will be supported by improvements in the Canadian economy in 2015.
“For credit card ABS, rising GDP growth and declining unemployment will bolster collateral performance,” says Richard Hunt, vice president and senior analyst at Moody’s. “These factors will also reduce delinquency levels and credit card charge-offs, supporting our positive outlook for the asset class.”
Moody’s also says that it is expecting an increase in issuance of credit card-backed ABS next year, given relatively low issuance in 2014 and rising maturities in 2015. Canadian auto ABS issuance is also forecast to rise next year, and credit quality is expected to remain robust, due to positive economic trends and strong borrower profiles.
The Canadian RMBS market is also expected to continue to perform well in 2015, Moody’s says. And, it says that the credit quality of all Canadian covered bonds will remain strong too, “given the sound credit profiles of the issuers and the high quality of the residential mortgage collateral.”