Wider spreads and credit enhancement causing upgrades in auto asset-backed securities reduces the sector’s risk against similarly rated and maturity corporate debt, says Rod Chadehumbe, Bloomberg Intelligence ABS Strategist. Chadehumbe joins host Ira Jersey, BI’s US Rates Strategist to discuss the findings from the first ABS Primer on available on the terminal. Though spreads are tight compared to the five-year average, inflation may not cause spreads to widen. The note also makes the case for Auto ABS against similarly rated and maturity corporate debt. Chadehumbe isn’t concerned about the current level of subprime delinquencies given the credit enhancement these structures have, but is concerned with the job market and what happens if delinquencies rise much further.
