While not as strong as 2018, combined new term asset-backed securities, asset-backed commercial paper and covered bond issuances closed out 2019 hitting $81.3 billion, according to a report from DBRS Morningstar.
Collateral underpinning Canadian structured finance transactions performed well for the year, with the majority of notes rated by DBRS Morningstar either earning confirmations or upgrades of their ratings.
Throughout the decade, a number of new issuance trends emerged, the report noted, including higher issuances of securitizations backed by consumer-related receivables. As well, more term ABS issuance was placed in the U.S. and there was a higher volume of uninsured mortgages funded through covered bond, residential mortgage-backed securities and asset-backed commercial paper issuance. And, there was a higher rate of issuances of a larger average size from new and existing players.
Commercial mortgage-backed securities saw healthy demand from investors, yet volume remained low during 2019, the report found. “While Canadian commercial banks are becoming more cautious and selective at the late stage of the current real estate cycle, the overall Canadian commercial real estate lending market remains competitive as more alternative capital sources (e.g., life insurance companies, pension funds, private debt, and foreign banks) have become increasingly active in Canada with the stable Canadian economy and solid real estate performance,” it said.
While 2020 has started strong, coronavirus is one worry for investors to keep on their radars. “This year started with positive momentum backed by new issuances in the auto lease, credit card, residential mortgage, and covered bond sectors marked by strong investor demand leading to favourable pricing for issuers,” the report noted. “However, momentum is already showing signs of potential disruption caused by uncertainty about the extent to which the coronavirus disease . . . outbreak will affect global markets.”