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Global Structured Finance Midyear Outlook 2021: Issuance Forecast Raised To $1.4 Trillion

Global structured finance new issuance volume increased 60% year over year to approximately $685 billion in the first half of 2021. New issuance volume also increased 30% compared with the same period in 2019. The robust growth reflects the ongoing recovery from the COVID-19 pandemic and higher-than-expected economic growth, as well as low available yields and low benchmark rates driving demand for structured finance products. As a result, we increased our 2021 global full-year issuance forecast approximately 15% to slightly over $1.4 trillion, which would comfortably exceed the previous $1.15 trillion high set after the Great Recession in 2019.

By region, the U.S, Europe, China, Australia, and Latin America saw considerable year-over-year gains during the first half, while Japan posted modest growth and Canada saw declines (see table 1 and the sections below for more details).

We believe conditions remain favorable for structured finance issuance through year-end as the recovery from the pandemic progresses. The negative effects of the pandemic appear to be subsiding in most structured finance markets, but new variants and infection waves pose credit and issuance risks. Structured finance ratings have held up relatively well overall, even though the aggregate ratings migration turned negative (especially for CMBS, which was the worst-affected sector). Corporate and commercial real estate credit performance metrics also deteriorated but are now bouncing back. Meanwhile, consumer credit performance has been more benign, though ongoing policy support could be masking underlying pressures. For more detail, see "2020 Annual Global Structured Finance Default And Rating Transition Study," published May 13, 2021, and "Global Structured Finance: Charting The Recovery From COVID-19," published June 14, 2021.

Table 1

Global Securitization Structured Finance Issuance(i)
Forecasts Six months ended June 30 Full-year
2021 (updated) 2021 (original) 2021 2020 2019 2020 2019 2018 2017 2016
U.S. (bil. US$)(ii) 630 520 351 204 289 453 582 540 505 366
Canada (bil. C$) 11 21 5 8 12 11 19 25 20 18
Europe (bil. €)(ii) 100 75 52 32 42 69 102 107 82 81
Asia-Pacific (bil. US$)
China 550 500 212 140 135 432 334 292 220 116
Japan 62 60 31 30 30 60 61 56 48 53
Australia 28 22 16 9 14 22 31 23 36 16
Latin America (bil. US$) 18 15 10 5 5 13 13 9 17 12
Total global new issuance (approx. bil. US$) 1,415 1,225 685 425 525 1,070 1,150 1,050 930 670
(i)Data as of June 30, 2021. (ii)Doesn't include CLO resets or refinancings. Source: S&P Global Ratings, S&P Global Market Intelligence, Bloomberg, Intex, and Commercial Mortgage Alert.

North America | U.S. | All Major Sectors Saw Growth; CLOs Lead

James M Manzi, CFA, Washington D.C. + 1 (202) 383 2028;

Brenden J Kugle, Centennial + 1 (303) 721 4619;

U.S. structured finance new issuance increased 72% year over year to $351 billion in the first half of 2021 (see chart 1). This amount represents over 60% of the $582 billion full-year total in 2019 (a post-crisis record) and almost as much as the 2016 full-year total (see table 2). The quarterly breakdown was approximately $158 billion issued in the first quarter of 2021 and $193 billion issued in the second quarter.

Following a solid first quarter, new issuance continued its positive momentum with a very active second quarter, buoyed by better-than-expected U.S. economic growth, the impact of the government stimulus programs and vaccine rollout, the economic reopening, low yields spurring demand for structured finance products, and improving credit outlooks.

We also assessed the performance of loans emerging from forbearance and noted that auto loan extensions have fallen back to pre-pandemic levels and mortgage forbearance levels continued to decline. Still, some sectors have relatively longer roads to recovery, and downgrades could occur in certain subsectors such as malls and lodging-backed (especially those counting on group travel) CMBS, aircraft ABS, and small-business ABS.

Considering these factors, we raised our U.S. 2021 full-year issuance forecast to $630 billion from our initial forecast of $520 billion.

Asset-backed securities (ABS)

By sector, ABS new issuance increased approximately 66% year over year to $147 billion through June. Of this amount,

  • Auto loan and lease receivables issuance accounted for 42% of the total, at $62 billion;
  • Credit card ABS issuance increased modestly year over year and accounted for slightly under $4 billion;
  • Personal loan ABS issuance remained active and accounted for nearly $8 billion, which led us to raise our 2021 forecast to $15 billion from $10 billion;
  • Student loan ABS issuance accounted for over $17 billion, which also led us to raise our forecast to $30 billion from $20 billion; and
  • Commercial ABS (equipment, fleet, and dealer floorplan) issuance was relatively steady year over year at $15 billion.

The remaining amount was a mobile phone and device payment plan agreement offering for $1.7 billion.

We now expect U.S. ABS issuance to reach $260 billion in 2021, up from our previous forecast of $220 billion. This revision largely reflects the greater-than-expected issuances in the auto lease, student loan, personal and marketplace loan, and non-traditional and other (esoteric) subsectors. If our full-year forecast is realized, it would represent a roughly 35% increase from the $193 billion issued in 2020.

Collateralized loan obligations (CLOs)

CLOs were by far the most active asset class, with $81 billion in new issuance through June. This represents a 128% year-over-year increase, which is on track to surpass the record $129 billion issued in 2018. CLO refinancings (refis) and resets, which are not included in the new issue total, were approximately $138 billion as of June. This brings the combined CLO issuance total to $219 billion as of June--closing in on the $285 billion full-year issuance records set in 2017 and 2018 (each year had separate mixes of new issuances to refis and resets). As a result, we revised our U.S. CLO full-year new issuance forecast to $140 billion from $120 billion.

Commercial mortgage-backed securities (CMBS)

After trailing through the first quarter, CMBS new issuance increased over 60% year over year to $46 billion through June. Single-borrower issuance represented approximately $31 billion of this amount (which was a historical high both in terms of dollar volume and percentage of the market), while conduits totaled $15 billion. As a result, we raised our U.S. CMBS full-year private label issuance forecast, excluding commercial real estate CLOs, to $80 billion from $70 billion.

Residential mortgage-backed securities (RMBS)

RMBS new issuance increased nearly 50% year over year to $78 billion through June. Of this amount,

  • Prime offerings represented about $26 billion, with prime jumbo accounting for $10 billion;
  • Non-qualified mortgage (non-QM) issuance represented $11 billion;
  • Single-family rental represented approximately $7 billion; and
  • Credit risk transfer (CRT) and non-performing loan (NPL) transactions each represented over $6 billion, while reperforming loan transactions represented over $5 billion.

Other subsectors with a few billions in issuance included mortgage insurance (MI) risk transfer, warehouse finance, and home equity lines of credit (HELOCs).

We had forecast prime and conforming issuances to lead overall RMBS growth in 2021, but they surpassed our expectations by midyear. This growth predominantly reflects three factors: the improving macroeconomic conditions, the continued resilience in the housing sector, and the increased usage of securitization as a funding source due to the seller caps on investor and second home loans imposed by government-sponsored enterprises (GSEs). Based on these factors, we raised our U.S. RMBS full-year non-agency issuance forecast to $150 billion from $130 billion.

Chart 1


Table 2

U.S. Structured Finance Issuance (Bil. US$)(i)
Full-year Six months ended June 30
2015 2016 2017 2018 2019 2020 2020 2021 2021 forecast (updated)
ABS 183 191 229 239 244 193 88 147 260
CMBS 95 69 88 77 96 53 28 46 80
CLO 98 72 118 129 118 93 35 81 140
RMBS 54 34 70 95 124 114 52 78 150
Total U.S. new issue 430 366 505 540 582 453 204 351 630
CLO reset/refi(ii) 10 39 167 156 43 33 25 138 N/A
CRE CLO(ii) 5 3 8 14 18 8 6 20 N/A
(i)Data as of June 30, 2021. (ii)Not included in the new issue total. ABS--Asset-backed securities. CMBS--Commercial mortgage-backed securities. CLO--Collateralized loan obligations. RMBS--Residential mortgage-backed securities. CRE--Commercial real estate. Source: S&P Global Ratings, LCD/S&P Global Market Intelligence, Bloomberg, Intex, Asset-Backed Alert, and Commercial Mortgage Alert. Note: figures were rounded after calculations and may be revised from time-to-time based on new information. N/A--Not applicable.

North America | Canada | Volumes Decline As Banks Pull Back From Structured Finance

Sanjay Narine, CFA, Toronto, +1 (416) 507-2548;

Public term ABS new issuance volume (excluding covered bonds) decreased 44% to C$4.6 billion in the first half of 2021 from C$8.2 billion a year earlier (see chart 2). Of this amount, credit card ABS increased 16% to C$2.1 billion (46% of ABS issuance), while auto and equipment related ABS increased 57% to C$2.0 billion (45%). Meanwhile, RMBS issuance declined 90%, and there has been no public CMBS issuance so far in 2021.

After no issuance during the first four months of 2021, cross-border credit card ABS issuance jumped to $1.8 billion (86% of the C$2.1 billion credit card ABS issued) by June. Comparatively, there was no cross-border auto ABS issuance. We believe the relative scarcity of bank-sponsored issuance reflects the significant increase in deposits and the Canadian banking sector's strong liquidity position. Canada's smaller structured finance market was slower to rebound from the impact of the pandemic, compared with the more liquid and deeper U.S. market.

In the U.S., credit card and auto ABS spreads have either returned to or are below pre-pandemic levels, which could be favorable for Canadian cross-border issuance. Nevertheless, we believe Canadian ABS issuance volume faces a significant risk of missing our full-year issuance forecast of C$21 billion. We, therefore, lowered our 2021 issuance forecast by approximately 50% to C$11 billion, though we expect Canadian term ABS transactions will continue to benefit from stable performance in 2021 and that our ratings on Canadian ABS will remain stable.

Chart 2


Europe | Non-Bank Issuance Growth Fuels Robust Volume

Andrew South, London, +44 20 7176 3712;

European investor-placed new issue securitizations could end the year close to €100 billion after bouncing back from the market disruption caused by the COVID-19 pandemic. Volumes increased more than 60% year over year to €52 billion in the first half of 2021. Although 2020 may be a flattering basis for comparison, issuance through June 2021 was also almost on a par with the post-financial crisis record set in 2018.

The central banks' ongoing large-scale provision of cheap term funding for credit institutions in response to the COVID-19 pandemic continues to stifle bank-originated structured finance supply. However, non-bank issuance more than doubled year over year in the largest European subsector (U.K. RMBS), and the leveraged loan CLO market has also seen solid growth.

CLO refinancing and reset activity, which is not included in our issuance data, soared to a record €35 billion through June. CLO transactions that came to market in 2020 priced at wide spreads, given uncertainty over corporate credit performance. But many were structured with unusually short non-call periods to take advantage of an anticipated recovery in financing costs that has since materialized, leading to a spike in refinancing and reset activity.

Most ratings have been resilient to the effects of the pandemic. In the 12 months ended June 2021, we lowered only about 3% of our ratings on European securitizations. However, we expect credit performance could remain under pressure through the end of the year. For sectors backed by lending to consumers, the underlying borrowers have benefited from both income support and debt payment deferral schemes. As these support measures come to an end, collateral performance could begin to deteriorate in line with rising unemployment.

For corporate-backed transactions, rising credit distress among underlying borrowers could pose some credit risk. For example, we expect the annualized default rate for European speculative-grade corporates to remain elevated at over 5% through March 2022, and this prolonged period of higher defaults could have a knock-on effect for European CLOs. That said, European CLO ratings migration will also depend on how well collateral managers continue mitigating credit deterioration through trading activity.

Asia-Pacific | China | RMBS Rebounds As ABS Growth Drives Gains

Jerry Fang, Hong Kong, (852) 2533-3518;

Chinese structured finance securitization new issuance increased 42% year over year to Chinese renminbi (RMB)1.369 trillion (US$212 billion) in the first half of 2021. The surge in issuance is largely attributable to the rebound of RMBS and continued growth in corporate ABS.

RMBS issuance increased 226% year over year to RMB264 billion though June, reflecting an increase from the low base during the same period in 2020 due to the COVID-19 pandemic and the need for loan book management. Meanwhile, auto ABS issuance increased 16% year over year to RMB122 billion and some corporate ABS subsectors, such as account receivables, saw issuance growth of over 100%.

We expect new issuance to total about RMB3.6 trillion (US$550 billion) in 2021 if the RMBS issuance momentum continues and that corporate ABS will remain robust.

Asia-Pacific | Japan | Modest Growth And Stable Ratings To Continue

Yuji Hashimoto, Tokyo, +81-3-4550-8275,

Japanese structured finance new issuance increased approximately 4% year over year to US$31 billion in the first half of 2021. The increase partly reflects recovery from the effects of the COVID-19 pandemic. We expect total issuance to rise to US$62 billion in 2021, mainly due to higher ABS issuance with auto loan ABS and mobile phone installment ABS remaining the leading subasset classes by issuance amount.

The pandemic situation in Japan remains fluid. Measures to contain the virus have burdened the Japanese economy, and unemployment rose to 3.0% in May 2021 from a 2021 low of 2.6% in March. This could lead to worsening performance for pools of loans extended to individuals, such as residential mortgage and auto loans. However, we expect the impact will be relatively limited on overall performance. As Japan's vaccination program progresses, we expect infection rates to decline as the inoculation rates rises, with economic recovery following as restrictions ease.

We expect our ratings on structured finance securitizations will remain generally stable in the second half of 2021. Subordination levels are rising for our rated transactions that employ sequential pay, and the performance of underlying loans in Japanese securitizations has long been relatively stable.

Asia-Pacific | Australia | Non-Bank RMBS Issuance Drives Growth

Erin Kitson, +61-3-9631-2166,

Australian structured finance new issuance continued its upward momentum from the pandemic-induced hiatus, with a 92% year-over-year increase to $16.4 billion in the first half of 2021. RMBS represented approximately $14.3 billion of this amount, while ABS accounted for the remaining $2.1 billion. Overall, new issuance in the first half was mostly a non-bank affair. Banks remained largely on the sidelines as they took advantage of cheaper funding available via the Reserve Bank of Australia's Term Funding Facility, which has since expired.

The strong demand for Australian RMBS has led to a marked contraction in spreads, with current pricing below pre-pandemic levels. This reflects the global search for yield, Australia's strong economic recovery from the pandemic with unemployment declining to pre-pandemic levels, and the growing interest in Australian RMBS to offshore investors.

Australia's successful management of COVID-19 has enabled the economy to largely reopen, underpinning its strong economic recovery. Overall, low interest rates and generous fiscal stimulus measures have enabled many households to build repayment buffers, shoring up household balance sheets and keeping arrears low. This has eased the transition from mortgage deferral arrangements, which were negligible at 0.5% of total RMBS loans outstanding at the formal expiration of the programs in March. However, the recent COVID-19 outbreaks in major capital cities continue to affect small businesses and self-employed borrowers in sectors more affected by lockdowns. Further, Australia's low vaccination rates will necessitate the use of lockdowns until a higher percentage of the population is vaccinated. We believe this will likely have a greater impact on the nonconforming sector, given its higher exposure to self-employed borrowers.

We expect Australian structured finance new issuance to remain buoyant during the second half of 2021 as banks re-enter the market following the cessation of the Term Funding Facility. Strong demand for housing credit will continue to drive new issuance more broadly as property values continue to increase, fueled by low interest rates, undersupply in some markets, and renewed confidence in the post-pandemic recovery. Given this backdrop, we expect new issuance to increase 20%-30% year over year in 2021.

Latin America | Brazil Continues To Lead New Issuance

Jose Coballasi, Mexico City, 52-55-5081-4414,

Leandro C. Albuquerque, Sao Paulo, + 1 (212) 438 9729,

Latin American structured finance new issuance exceeded our expectations with $10 billion in volume during the first half of 2021--roughly double last year's first half total (see chart 3). This growth mirrored the improvement in the region's macroeconomic expectations.

Brazilian new issuance has been robust, particularly in Fundo de Investimento em Direitos Creditórios (FIDCs), and it continues to drive new issuance in the region. Meanwhile, Mexican and cross-border ABS issuance totaled $0.3 billion and $0.6 billion, respectively.

We expect new issuance volumes to remain strong in Brazil in the second half of the year, given the favorable interest rate environment for fixed-income investors. We also expect issuance activity to increase in Mexico, driven by the RMBS and ABS equipment segments, as well as some activity in the cross-border market (mainly repackaged securities). Based on these factors, we raised our full-year issuance forecast by approximately 20% to $17.5 billion.

Chart 3


This report does not constitute a rating action.

Global Structured Finance Research:James M Manzi, CFA, Washington D.C. + 1 (202) 383 2028;
Tom Schopflocher, New York + 1 (212) 438 6722;
Brenden J Kugle, Centennial + 1 (303) 721 4619;
Primary Credit Analysts:Jose Coballasi, Mexico City + 52 55 5081 4414;
Jerry Fang, Hong Kong + 852 2533 3518;
Yuji Hashimoto, Tokyo + 81 3 4550 8275;
Erin Kitson, Melbourne + 61 3 9631 2166;
Sanjay Narine, CFA, Toronto + 1 (416) 507 2548;
Andrew H South, London + 44 20 7176 3712;

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