Market Highlights and Commentary

Market Environment

Economic conditions

According to Eurostat, GDP rose by 0.3% quarter-over-quarter (QoQ) in the Euro zone (EU19) and by 0.4% in the EU28 during the third quarter of 2016. The unemployment rate stood at 10.0% (EU19) and 8.5% (EU28) as of the end of September 2016, the lowest rate recorded since 2011 (EU19) and 2009 (EU28).

Term Issuance and Outstanding Volumes

In Q3 2016, EUR 40.2 billion of securitised product was issued in Europe, a decline of 46.5% from Q2 2016 (EUR 75.0 billion) and a decline of 30.3% from Q3 2015 (EUR 57.6 billion). Of the EUR 40.2 billion issued, EUR 16.0 billion was placed, representing 39.8% of issuance, compared to EUR 29.3 billion placed in Q2 2016 (representing 39.1%) and EUR 18.6 billion placed in Q3 2015 (representing 32.3%).

For the third quarter, UK RMBS continued to lead placed totals (EUR 3.7 billion), followed by European CLO (EUR 3.4 billion) and Dutch RMBS (EUR 2.9 billion).

Net issuance was negative for the third quarter of 2016, with EUR 1.24 outstanding at the end of 3Q’16, down from EUR 1.27 trillion at the end of 2Q’16. Of this, approximately EUR 699.8 billion, or 56.2%, was retained.

Credit Quality

In Europe, upgrades outpaced downgrades in Q3 2016 among European securitised product, with upgrades concentrated in European CLOs and prime RMBS, similar to prior quarters.

ABCP Trends

European asset backed commercial paper (ABCP) issuance was EUR 135.8 billion in Q3 2016, an increase of 13.1% QoQ and 35.8% YoY. Multiseller conduits continue to dominate as the largest category of issuer in the ABCP market, particularly from Ireland and France. European ABCP outstandings increased modestly from the previous quarter, ending the third quarter at EUR 16.9 billion, up by 10.5% from EUR 15.3 billion in Q2 2016.