No Joy on the Securitization Market Forecast for 2010

  • JJ Hornblass
  • December 1, 2009
  • 1

That sigh of relief you hear is the asset-backed securitization market thanking its lucky stars for the federal government.

Without the Treasury Department’s Term Asset-Backed Securities Loan Facility, more commonly known as TALF, the ABS market would have been as busy as a roller coaster in a snowstorm. Instead, the ABS market has posted a respectable year, generating about $130 billion of issuance so far, and with spreads and cash-investor demand both rallying.

And in 2010? JP Morgan Chase & Co., in its 2010 ABS market forecast published today and obtained by, says the ABS market supply should be about flat at $140 billion next year — a far cry from the ABS market’s heyday of $900 billion in 2006. As JPM put it, “The heyday of the ABS market is not coming back, and our $140 billion projections is in line with the pre-subprime mortgage book years of the early 2000s.”

Part of the reason why JPM is projecting a flat 2010 is because the TALF program is scheduled to end on March 31, 2010, and end it will, predicts the investment bank. Another point:

In addition, issuance activity will shift away from major banks to finance companies. This translates to continued contraction of the Bankcard sector, and growth in Auto-related securitizations. … Net issuance (i.e., gross supply minus maturing bond amount) will remain sharply negative. We estimate net 2010 supply contraction of $170bn due to decreased use of securitization as a funding source by major banks and the sustained decline of subprime lending.

Indeed, JPM’s forecast makes one dynamic perfectly clear: there will be zero subprime mortgage ABS in 2010, just as there was zero issuance for such assets in 2008 and 2009. And to think, back in 2006 $559 billion of subprime mortgages were packaged into asset-backed securities. Oh, how times have changed.

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JJ started the first iteration of Bank Innovation back in 2007, and has been working on it ever since. He also serves as President & Chief Executive Officer of Royal Media, Bank Innovation’s parent. He founded Royal in 1995 and oversees all aspects of the New York-based diversified media company. Prior to forming Royal, JJ was on the editorial staff of American Banker, the daily newspaper, and worked as an editor of a business magazine in Hong Kong. As a reporter and editor, he has won journalism awards from the National Press Foundation, Newsletter & Electronic Publishers Foundation, and the Reader’s Digest Foundation. He has a BS in Economics from Yeshiva University and a Master’s from the Columbia University Graduate School of Journalism. He was also a Fellow at the University of Wisconsin-Madison Graduate School of Banking. He lives in New York City with his wife, two daughters, and son. He counts among his accomplishments one New York City Marathon, two New York City Triathlons and the 2010 Father’s Day 5K, the first race he ever ran with his daughters. He can be reached at or 212-564-8972.

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One thought on “No Joy on the Securitization Market Forecast for 2010

  1. Wasn’t sure which one was best. Here’s the graph you referenced:

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