The global market for securitisation has suffered a serious setback since September 2007, triggered by the credit crunch, with issues falling away in the final months of the year.

IFSL’s (International Financial Services London) Securitisation report notes that strong issuance in the first half meant that global issuance in 2007 was down only 8% to $3,826bn from the previous year’s high of $4,138bn. In Europe issues which peaked at $225bn in the second quarter of 2007 more than halved to $101bn in the fourth quarter.   

Market estimates point to global issuance falling by about a quarter in 2008 to $2,850bn. The decline is a result of turbulence in credit markets, a lack of liquidity and a reduction in investors’ tolerance of risk. These difficulties were triggered by high default rates in the US on ‘sub-prime’ loans, many of which were packaged and sold on to investors through mortgage-backed securities. US authorities have initiated a series of measures to alleviate strains in credit markets, most recently a reduction in the surplus capital built up by federal agencies – Fannie Mae and Freddie Mac - which should release up to $200bn to the US mortgage markets. 

US issues still dominate, making up 76% of the global market in 2007, although this is down from 90% in 2003. UK remains the largest issuer in Europe with UK issues down 2% to $235bn in 2007. European issues rose 13% to $684bn, resulting in the UK’s share dropping from 40% to 35%. Issues in Europe peaked at $164bn in the second quarter of 2007 before falling away to $74bn in the fourth quarter.