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| Prime European ABS in vogue again as investors chase 'secure' yields |
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The continuing historic low level of market interest rates, as typified by sub 1% short-term interbank deposit rates and negative real rates on core sovereign long-term debt, has led to a search for yield in other asset classes for some time now. However, when combined with significant uncertainty regarding global macroeconomic conditions, the European banking system and the health of peripheral European sovereign balance sheets, it has been challenging to find secure, short maturity assets able to generate this yield. Given the negative headlines associated with the asset class since the beginning of the financial crisis, some people may be surprised to hear that prime European asset-backed securities (ABS)* are one of the investments being sought by investors. Short-dated, prime ABS have enjoyed a resurgence in demand, particularly from money funds. Ironically it was three BNP Paribas money funds, which were among the first high profile victims of the financial crisis when they suspended withdrawals as they could not accurately value their holdings due to the fall out from the US sub-prime mortgage crisis. Short-dated, prime UK residential mortgage-backed securities (RMBS) have seen yields fall from approximately 2.2% to 1.5% per annum during the past three months - in large part due to the increase in demand from these funds. While we believe this demand has been technically driven due to the exceptionally low interest rate environment, central bank injected system liquidity and the fact that new issuance volumes have been light, we do believe that the performance of such ABS justifies their 'secure yield' status in these uncertain times. * A financial security backed by a loan, lease or receivables against assets other than real estate and mortgage-backed securities. by Henderson Global Investors Further information www.henderson.com 14.08.2012 save-more-energy.com is an independent b2b platform for Green Investment & Sustainable Development. Green Buildings, Retrofit, Urban Transformation, Renewable Energy, Future Cities and Investment Opportunities in Europe incl. CEE/SEE and Middle East Area. |
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