The troubles the secondary mortgage market has endured since the end of the refinance boom are beginning to show as the asset- backed security market is matching the mortgage-backed security market blow for blow.
For just the third time ever--and the third time this year-- monthly new issuance of asset-backed securities exceeded the issuance of mortgage-backed securities, according to data provided by Securities Data Co. The latest surge came in October when total ABS issuance was $7.8 billion, nearly $3 billion more than the slumping MBS market which totaled just $4.9 billion.
Asset-backed securities, which are formed from a variety of sources including home equity loans and receivables from auto, credit card and manufactured housing loans, reached a 1994 high when it topped $11.1 billion in August. Just three months before ABS registered more than $10.8 billion and beat the MBS market for the first time ever.
The strength of the economy and the rising interest rate have kept the two markets neck-and-neck for the past six months. The increase in asset-backed securities this year has been traced largely to the credit card sector where refinancing of deals have matured and an increase in consumer borrowing have pushed new issuance past $29 billion, compared with the $19 billion issued in 1993.
Meanwhile, rising interest rates and the end of the refi boom have taken a heavy toll on mortgage-backed security issuances, which have fallen steadily since total volume hit $42.45 billion in January.