Asset Backed Securities Market Analysis

Asset Backed Securities Market Analysis

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Based on underlying asset, the market is divided into Residential Mortgage-Backed Securities (RMBS), Commercial Mortgage-Backed Securities (CMBS), auto loan/lease ABS, credit card ABS, student loan ABS, and equipment lease ABS. The RMBS segment is poised to exceed USD 700 billion by 2032. The increasing amount of outstanding household mortgage debt is driving the asset backing securities market growth. This trend provides a larger pool of mortgage loans available for securitization, thereby expanding the supply of Mortgage-Backed Securities (MBS) within the market.
 

According to the Urban Institute, Housing Finance Chartbook, in the third quarter of 2023, households' outstanding mortgage debt increased by 0.6% during the quarter, reaching a total of USD 12.9 trillion. Investors are attracted to these securities due to their stable cash flows, contributing to the overall growth and liquidity of the market.
 

Based on issuer types, the asset backed securities market is categorized into financial institutions, captive finance companies, specialty finance companies, and Government-Sponsored Enterprises (GSEs). The financial institutions segment held a major market share of around 37% in 2023. Financial institutions benefit from access to capital, leveraging their large depositor bases and borrowing capabilities to originate and package diverse assets for securitization.
 

Additionally, they possess specialized expertise and established infrastructure in structuring, underwriting, and servicing asset-backed securities, ensuring efficient issuance processes. This expertise encompasses risk assessment, legal compliance, and investor relations, enabling smooth navigation of complex asset-backing securities markets. Together, these factors empower financial institutions to play a pivotal role as issuers in the market, driving its growth and facilitating liquidity.
 

North America dominated the global asset backed securities market with a share of over 27% in 2023. The increasing demand for various forms of consumer credit, such as auto loans, credit card receivables, and student loans, has provided a steady supply of underlying assets for securitization. Consumer lending activities continue to grow, driven by factors, such as population growth and economic expansion, providing a consistent pipeline of assets that can be packaged into asset-backed securities for investors.
 

Robust economic expansion across key Asia Pacific economies, coupled with burgeoning consumer markets, has catalyzed demand for credit facilities. This surge in consumer lending has generated a substantial pool of securitizable assets, including auto loans, credit card receivables, and residential mortgages, driving issuance volumes in the region's asset-backed securities market.
 

Increased issuance and innovation in the Europe ABS market are driven by a broader array of securitized assets and creative financial structures. New asset classes, such as renewable energy project receivables and fintech-originated loans, are being securitized. This expansion diversifies the market and attracts various investors. Additionally, innovative structures, including synthetic securitizations and hybrid models, enhance flexibility and investment opportunities. These developments contribute to a dynamic market environment, fostering growth and investor interest.