Global securitization issuance volume was up about 3% year over year (y/y) in the first half of 2019, to approximately $520 billion, as growth in the Asia-Pacific region, especially China, offset modest-to-moderate declines in the U.S. and Europe. Canada and Latin America were also down slightly. S&P Global Ratings' forecast for total global issuance volume in 2019 remains at just over US$1 trillion. Our 2019 issuance projections were reduced somewhat in Europe, to €80 billion-€90 billion from €90 billion-€100 billion, while the other country/region forecasts were unchanged from Q1 (see table).

U.S.

U.S. structured finance (SF) new issuance volume reached $146 billion in Q2 (unchanged y/y) and $275 billion in 1H (-4% y/y). The slight decline in the 1H y/y comparison was mostly due to broader market volatility in December 2018-January 2019.

ABS

Asset-backed securities (ABS) new-issue volume in Q2 2019 ($67 billion) exceeded Q2 2018 by about 7%, led by strong gains in auto ABS (+$4 billion quarter over quarter), personal loan ABS (+$2 billion), and commercial ABS (+$2 billion) volume. Credit card ABS volume was down. 1H 2019 ABS volume reached $128 billion, down just slightly from $132 billion last year. Our full-year 2019 ABS issuance forecast remains at $245 billion.

CLO

Collateralized loan obligation (CLO) new-issue volume of $36 billion in Q2 and $65 billion in 1H were off 2% and 5% from the comparable 2018 periods. Higher liability spreads continue to hold back CLO resets and refinancings, where issuance was down by over 70% y/y for both 1H and Q2. 1H CLO reset/refi volume came in at $24 billion, down from $84 billion over the same period in 2018. The market, however, has shown some recent signs of tightening. We are maintaining our CLO new issuance forecast of $110 billion for full-year 2019 and expect about $60 billion in CLO reset/refi volume.

CMBS

Following a more active May/June period, commercial mortgage-backed securities (CMBS) issuance of $22 billion in Q2 brought the 1H figure to $39 billion, not far behind the 2018 pace. Single-borrower volume was $20 billion, accounting for more than half of total issuance (up from just under half during full-year 2018). Our 2019 overall volume forecast (excluding commercial real estate CLOs) remains at $80 billion.

RMBS

Private-label residential mortgage-backed securities (RMBS)-related issuance was down about 17% y/y in Q2 to $21 billion, but flat on a year-over-year basis for 1H so far at $43 billion. Nonqualified mortgage (non-QM) RMBS continues to have a strong year, with 1H issuance reaching $10 billion--about double 2018's figure. We expect about $100 billion in private-label RMBS-related issuance this year.

Overall

Conditions remain generally supportive for SF issuance, with moderate economic growth, low unemployment, and low long-term rates. Absent an exogenous shock to the system, we are maintaining our $535 billion full-year forecast for new issuance volume.

Canada

Canadian public term ABS (excluding covered bonds) issuance volumes in the first half of 2019 were down by 12% to C$12.3 billion, from C$13.9 billion for the same period a year ago. Of this ABS issuance, 56% constituted cross-border transactions. Credit card and unsecured ABS volumes declined to C$6.4 billion from C$8.8 billion in the first half of 2018. Auto ABS remained steady at C$4.3 billion through the same periods.

Cross-border credit card ABS issuance of US$4.05 billion for the first half of 2019 remained in line with the issuance volume of US$4.03 billion for the first half of 2018. Auto ABS cross-border transactions increased 3%, with issuance of US$1.14 billion for 1H 2019 versus US$1.11 billion for the first half of 2018.

We believe Canadian ABS issuance volume is on target to reach C$20.0 billion by the end of the year, with cross-border transactions remaining strong.

Europe

Disruption caused by the Jan. 1, 2019, implementation of the EU's new securitization regulation abated in the second quarter, although investor-placed issuance in the European securitization market is still down by nearly 25% for the first half of 2019 y/y. Uncertainties over eligibility criteria for the "simple, transparent, and standardized" (STS) label have moderated, as authorized verification agents have come online, facilitating a common understanding of the requirements. The first STS transaction priced in March and about 20 more have come to market since, according to the European Securities and Markets Authority. However, several technical standards for the new regulations--such as those covering disclosure requirements--are still not completely finalized and written into EU law, so uncertainty remains and some originators may stay away until there is greater clarity.

The CLO sector has so far been least affected by the regulatory upheaval and year-to-date issuance has continued on par with 2018 levels. However, the market looks set to cool in the second half of the year. Some Japanese bank investors that were heavy buyers of senior CLO tranches have now stepped away, while an influx of new CLO managers continues to establish European operations. However, there is little evidence that the CLO bid is boosting underlying origination volumes of leveraged loans. On the contrary, 12-month trailing loan originations have dropped by more than 40% from a peak in early 2018, suggesting that the rate of new CLO formation could halve over the rest of the year.

Finally, the recently announced terms of the European Central Bank's new round of targeted long-term refinancing operations (TLTRO) are somewhat less attractive for bank borrowers than in predecessor schemes. Although TLTRO III will likely dampen structured finance issuance, some originators may still have incentives to issue.

Asia-Pacific

China

New securitization issuance in China grew 31% in 1H from the same period last year, and is now at RMB924 billion, or 46% of the historical high seen in the full year of 2018 (approximately RMB2 trillion). Favorable interest rate environments and increasing loan origination continued to pump up securitization issuance, though growth did slow in Q2, to 16% (RMB559 billion) y/y from 64% growth in Q1.

RMBS issuance remains the leader in issuance volume, but growth has slowed. Auto loan ABS, credit card ABS, and corporate receivables issuance are now driving overall growth. Concerns regarding the China-U.S. trade dispute reappeared in the second quarter; the flow-on macro uncertainty and the expedited rollout of new emission control requirements sank new vehicle sales in China over the last six months. Sales volume was 12.4% lower than that in 2018, and dealerships' inventory is piling. Auto loan origination, however, keeps advancing, and ABS issuance for the whole market has more than doubled from a year ago. Credit card receivables also inched up due to the expanding consumer credit market. Asset performance in retail receivables remained strong in the quarter, but we continue to see 2019 as a challenging year for some nonretail securitization transactions.

We are maintaining our 2019 new-issuance projection at US$330 billion-$340 billion, which we revised up last quarter from $310 billion.

Japan

Securitization issuance in the Japanese market continued to increase during Q2 2019, recording a rise of 18% y/y (excluding covered bonds). First-half issuance reached about ¥3.0 trillion, compared with ¥2.6 trillion for the same period in 2018.

As expected, the impact of the new national version of risk retention rules on securitization issuance was limited. The rules were introduced in March by Japan's Financial Services Agency, and affect regulatory capital requirements for investments in securitizations at certain types of Japanese financial institutions.

ABS and RMBS remained as the main asset classes, comprising more than 90% of the overall new-issue market. ABS was the main driver for overall issuance growth, with Auto ABS and mobile phone device receivables ABS leading the market.

Australia

Pacific SF issuance increased by over 61% in Q2 2019 y/y. Most of this increase was driven by RMBS, which has continued its upward momentum despite concerns around property price risk and a softening economy. RMBS issuance reached US$16.9 billion in Q2, up from $US10.1 billion a year earlier. Most of this issuance has again been driven by nonbank originators whose lending growth has continued to outpace banks in a tightened regulatory environment. Collateral performance has held up despite weaker wage growth and falling property prices nationally. Longer-dated arrears have increased, albeit from low levels, but the level of credit support available in most transactions provides a strong buffer to weather a moderate level of economic deterioration, in our opinion.

Offshore demand, particularly from Japanese investors, is expected to persist as the lure of higher yields continues to attract international attention given the low interest rate environment globally.

Latin America

Total issuance in the structured finance segment in Latin America was $2.7 billion in Q2 2019, bringing the 1H figure to $5.3 billion. Our new issuance forecast remains in the $11 billion-$13 billion range. As we had previously expected, issuance in Brazil is growing significantly. We are looking closely at collateral performance in Mexico, given the country's weakening economy. Finally, asset diversification continues to be a theme in the region; new originators (and asset classes) could debut in the coming months.