DBRS Morningstar Releases August 2023 Canadian Securitization Market Overview Report

DBRS Limited (DBRS Morningstar) released the Canadian Securitization Market Overview report for the month ended August 31, 2023. The report provides an overview of the total Canadian securitization market, including term asset-backed securities (ABS), commercial mortgage-backed securities, and asset-backed commercial paper (ABCP).

The total amount outstanding in the Canadian securitization market, including private placements, was $107.7 billion as at August 31, 2023. Term ABS represented 47.3% of the total securitization market, followed by ABCP at 42.7%, and private placements at 10.1%.

The Canadian securitization market (excluding private placements) continued to be dominated by credit card and auto-related transactions, which accounted for 39.2% and 23.3% of the total market, respectively. Residential mortgages accounted for 17.2%, home equity lines of credit accounted for 5.7%, and commercial mortgages accounted for 4.0%.

The number of quarterly filings for consumer insolvencies has returned to pre-pandemic levels and is likely to rise further as the impact of higher interest rates and persistent inflation continues to strain consumers’ finances. However, term ABS and transactions funded in ABCP conduits have continued to exhibit better credit performance than pre-pandemic experience. The Bank of Canada has raised the policy interest rate by 475 basis points to 5.0% since March 2022 to control inflation, which will continue to strain consumer finances and dampen demand. Nonetheless, DBRS Morningstar expects the downside risks to credit performance to be partially mitigated by low unemployment levels, the prime nature of obligors, and conservative assumptions coupled with high levels of credit enhancement available to noteholders.

The outstanding ABS and ABCP notes are well enhanced as of August 2023. DBRS Morningstar closely monitors the performance of all transactions and will continue to provide updates to the market.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The report is available at www.dbrsmorningstar.com.

For more information on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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