Morningstar DBRS Releases September 2024 Canadian Securitization Market Overview Report

DBRS Limited (Morningstar DBRS) released the Canadian Securitization Market Overview report for the month ended September 30, 2024. 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 $107.6 billion as at September 30, 2024. ABCP represented 45.2% of the total securitization market, followed by term ABS at 44.8%, and private placements represented 9.9%.

The Canadian securitization market (excluding private placements) continued to be dominated by credit card and auto-related transactions, which accounted for 37.3% and 24.3%, of the total market, respectively. Residential mortgages accounted for 19.0%, HELOCs accounted for 5.1% and commercial mortgages accounted for 3.7%.

Term ABS and transactions funded in ABCP conduits have continued to perform well amid a challenging macroeconomic environment. The higher interest rates worked their way through the economy, removing excess demand, lowering inflation. The Bank of Canada cut its benchmark interest rate four times this year, to 3.75%.

The number of quarterly filings for consumer insolvencies has returned to pre-pandemic levels and is likely to rise further as the impact of high borrowing costs and cost of living, along with a weaker labour market, continue to pressure consumers' finances. Collateral performance in Canadian structured finance transactions, has seen some slight deterioration but remains well within expectations across all asset classes. High asset resale values are likely to limit losses on defaulted secured receivables, supported by ongoing supply constraints in the housing market, and the normalization of used-vehicle prices at still historically elevated levels. In general, downside risks to credit performance in securitization pools of secured and unsecured receivables will be partially mitigated by the mostly prime nature of obligors, who demonstrate a strong record of repaying their debts on a timely basis, and conservative assumptions coupled with robust levels of credit enhancement available in the transactions that can withstand a deterioration in macroeconomic activity.

The outstanding ABS and ABCP notes are well-enhanced as of September 2024. Morningstar DBRS 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 https://dbrs.morningstar.com/.

For more information on this industry, visit https://dbrs.morningstar.com/ or contact us at info-DBRS@morningstar.com.

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