Market Graphic: Credit card ABS spreads

Markus Herrmann, head of global ABS strategy at HSBC, explains what is behind the recent weakening trend in European credit card ABS spreads and why there might be relative value in the asset class

Typically, European credit card ABS floater spreads have traded at the same level or tighter than comparable paper from RMBS master trusts. At least this has been the case over the last few years. 2006 brought a reversal of that trend, as the charts below show. Since the end of 2005, European credit card ABS spreads have moved against the overall tightening trend and have recently traded through the UK master trust benchmark spread. This movement was more pronounced on mezzanine single-A ratings

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