Investors are finding it easier to buy and sell securitized debt after it became impossible at some points during the financial crisis of recent years, according to Sanjeev Handa, TIAA-CREF's head of global public markets.
"The market has improved in terms of liquidity, with both investors and dealers willing to take risk," Handa said Monday during a panel discussion at the American Securitization Forum's annual conference in Washington.
Last year, securitization restarted after freezing in late 2008 following Lehman Brothers' failure, as government programs and a rally across debt markets revived interest in bonds such as credit card securities.
Issuance fell 34%, to $324.3 billion worldwide last year, excluding debt created with government-backed guarantees or retained by issuers to be pledged for loans from central banks outside the U.S., according to Asset-Backed Alert.
Total securitization volume climbed to a record $2.57 trillion in 2006, from $500 billion in 2000, according to the newsletter.
The market has "improved significantly," apart from the "still-broken" sector of private U.S. mortgage-backed securities, Valerie Kay, a managing director at Morgan Stanley, said on the panel. Her investment bank is generally "bullish" on yield premiums over benchmark rates, because even after tightening from records they remain wider than in the past, she said.
While the $1.2 trillion of U.S. commercial mortgages scheduled to mature through 2012 is "scary," a "kick-the-can" down-the-road mentality will minimize the damage as soured loans get reworked, she said.
A recent "reach for risk" in the mortgage bond market is troubling, said Sean Dobson, the chief executive of the broker Amherst Securities Group LP. "A lot of the practices we're seeing today mirror what caused this crisis," he said on the panel. "There's been a lot of government pricing of risk."
