Asset-backed Securities
Issuance
Volatility and uncertainty surrounding tariff implementation led to a slowdown in issuance at the beginning of the month. However, by mid-month, activity in the ABS primary market returned to more typical levels. During the final week of April, nearly $7 billion in new ABS deals were completed, spanning sectors such as prime auto, subprime auto, retail auto lease, equipment, timeshare and consumer ABS. This marked a significant rebound compared to the prior two weeks, which saw only $1.8 billion in new ABS issuance.
- • Year to date, ABS issuance has declined by nearly 19% compared to the same period last year.
- • Auto ABS issuance is down 21% versus 2024, with all segments of auto ABS experiencing declines; however, subprime auto ABS has shown resilience, with only a 4% drop.
- • Conversely, equipment ABS issuance has increased, rising 11% year over year.
ABS Issuance ($B)
Delinquencies
Prime auto ABS experienced a modest rise in delinquency rates in April. Meanwhile, rates declined for subprime auto, retail card and consumer loans. Credit card and marketplace lending delinquency rates remained largely unchanged.
Something different in the ABS world ... Corporate Card ABS
Corporate cards differ from traditional personal credit cards in several ways:
Pay in full
A charge card and does not carry balance: customers have to pay their outstanding balance in full at the end of each monthly statement period.
Zero interest on receivables
Does not charge interest on unpaid balances. Any unpaid balance becomes delinquent.
Automatic collection
Customers are required to link a bank account or a cash management account to the system, so issuers automatically collect the balance due directly from linked accounts and do not rely on customers to pay their balance manually. Customers with unpaid, past-due statements are unable to make additional purchases with their card until they become current.
Dynamic credit limits
Given the linked account, frequently re-assess the customer’s risk profile and adjust credit limits periodically in response to changes in cash balance.
Downside
Currently only one issuer in the space that has been issuing since 2021 with one deal currently outstanding. Limited availability in the primary market and minimal trading in the secondary market. Expectation is for additional issuers to enter the market.
Spread Widening — Corporates vs ABS (bps)
Spread widening in ABS stabilized, still offer attractive relative value.
Source: ICE BofA 1-5 Year AAA-A Corporate index and ICE BofA 1+ Year AAA ABS, comparable duration levels for comparative purposes.
Additional news
Federal student loan payments have resumed and could impair borrower credit scores and consumer credit health broadly, though the impact will most likely take more time to develop.
It should be noted that federal student loans are quite different than private student loans as there is no credit underwriting on federal student loans and they are provided on a need basis.
The US Department of Education is restarting collections on defaulted student loans and wage garnishment will begin later this summer.
While delinquencies continue to ramp up in the federal student loan space (26.8% 91-180 days delinquent, 7.0% 31-90 days delinquent), private credit student loans are holding up well (1.3% 90+ days, 3.8% 30+ days).
Federal student loan delinquencies (%)
Commercial Mortgage-backed Securities
CMBS Issuance ($B)
Despite an initial slowdown in early April, non-Agency CMBS issuance has maintained a robust pace throughout the first four months of the year. Private label CMBS issuance in 2025 has already exceeded the total issuance for 2023, reaching $48 billion compared to $46 billion. Both SASB (single asset, single borrower) and CRE CLO (commercial real estate collateralized loan obligation) issuance have surpassed their full-year 2023 levels, with CRE CLO issuance in 2025 also exceeding the total issuance recorded in 2024.
Delinquencies
- The overall CMBS delinquency rate rose to 7.03%, marking a 0.38% increase for the month and a 1.96% rise compared to the same period last year.
- Among property types, delinquency rates for Industrial (-0.10%) and Retail (-0.70%) declined month-over-month, while Lodging (+0.66%), Multifamily (+1.13%) and Office (+0.52%) saw increases during the month.
- The percentage of seriously delinquent loans (60+ days overdue, in foreclosure, real estate owned or non-performing) climbed to 6.54%, reflecting a 0.22% monthly increase.
Residential Mortgage-backed Securities
Private label RMBS issuance in 2025 is up 13% compared to the same period last year. Like other segments of the securitized market, private label RMBS experienced a sharp decline in issuance earlier in the month, followed by a strong rebound in the final weeks. The week of Liberation Day (2 April) marked the lowest weekly issuance volume of 2025, with just three deals priced. By contrast, the final week of April emerged as the busiest of the month.
RMBS Issuance ($B)
Key
Non-QM: Non-qualified mortgages
CAS/STACR: Connecticut Avenue Securities/Structured Agency Credit Risk
SFR: Single Family Rental
RPL/NPL: Re-performing loans/Non-performing loans
HELOC and Closed-End Second (CES) issuance has seen significant growth as homeowners explore new ways to leverage the equity in their homes without refinancing at higher mortgage rates. Year-to-date issuance in 2025 stands at $2.2 billion for HELOCs and $4.6 billion for CES, surpassing the issuance pace of the previous two years. (Both HELOC and CES are included under the “Other” category in the graph above).
*Transferred to Debt Management and Collection System
Sources: Deutsche Bank, Barclays, JP Morgan.
Investment Grade is a Bond Quality Rating of AAA, AA, A or BBB.
ICE BofA 1-5 Year AAA-A Corporate Index tracks the performance of US dollar-denominated corporate debt rate A or higher that are publicly issued in the US domestic market.
ICE BofA 1+ Year AAA ABS tracks the performance of US dollar-denominated, fixed-rate and floating-rate asset-backed securities (ABS) that are rated AAA and publicly issued in the US domestic market.
The views expressed are those of Diamond Hill as of May 2025 and are subject to change without notice. These opinions are not intended to be a forecast of future events, a guarantee of future results or investment advice. Investing involves risk, including the possible loss of principal. Past performance is not a guarantee of future results.