Credit Suisse Sees ‘New Normal’ in ABCP Market

Asset-backed commercial paper (ABCP) saw limited investor appetite in the week after Labor Day, according to weekly commentary from Credit Suisse Securities. “As this market continues to heal and we get used to the ‘new normal’, we will look towards both the broader markets and sister markets to ABCP in order to gauge where our market is headed,” Credit Suisse said. Wekly commercial paper data remained in-line with expectations, with total commercial paper outstanding dipping by $11bn to $1.17trn in the week ending September 9. ABCP outstandings slipped $6.7bn to $503.5bn this week, while corporate outstandings fell by $3.3bn to $128.5bn and financial outstandings fell by $1bn to $544.3bn. Outstanding commercial paper has been in decline lately, indicating an overall trend of tighter liquidity in the market. “We are constantly asked when the US ABCP market will stop dropping in terms of outstandings,” Credit Suisse added, “and we must be constantly reminded that we are still in a severe consumer recession, the term securitization market is still operating with a government lifeline, and the ABCP market itself still has government lifelines pumping through it; however, thankfully, the ABCP-related government programs are only being marginally used.” Dependence on government support programs diminished as the ABCP market as a whole stabilized in the first half of 2009, according to a structured finance report from Moody’s Investors Service. Moody’s researchers said in the report the market consists of bank-sponsored multiseller programs now that structured investment vehicles, collateralized debt obligations (CDOs) and securities programs have either disappeared or declined. “The outstandings of multiseller ABCP programs have declined, but largely because of declining business opportunities, either as perceived by the bank sponsors who are unwilling to renew or replace maturing transactions or as realized by their customers who are simply borrowing less in response to a weak economy,” Moody’s said. The firm expects ABCP issuance volume to depend on economic recovery through the end of 2009. Longer term growth in the market will be affected by evolving regulatory and accounting principals. Write to Diana Golobay.