DBRS Morningstar Releases May 2021 Canadian Securitization Market Overview Report

DBRS Limited (DBRS Morningstar) released the Canadian Securitization Market Overview report for the month ended May 31, 2021. 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 $73.0 billion as at May 31, 2021. Term ABS represented 46.6% of the total securitization market, followed by ABCP at 45.4% and private placements at 8.0%.

The Canadian securitization market (excluding private placements) continued to be dominated by auto-related and credit card transactions, which accounted for 29.3% and 23.3% of the total market, respectively. Residential mortgages, home equity lines of credit, and commercial mortgages accounted for 16.3%, 10.7%, and 6.6%, respectively.

Credit performance in term ABS and transactions funded in ABCP conduits remained strong mainly because of the government initiatives described below. During Q1 2021, Canada saw a third wave of the Coronavirus Disease (COVID-19) pandemic, which prompted the reinstatement of lockdown measures of varying degrees across the country. However, an accelerated roll-out of vaccines in Q2 2021 has resulted in a decline in cases and has turned attention to an acceleration of second doses and reopening measures, setting the stage for economic recovery.

Financial assistance provided by the government and lenders to consumer and business obligors early in the pandemic proved to be effective as delinquencies and loss ratios remained low for most transactions. The government of Canada’s programs (the Canada Recovery Benefit, the Canada Recovery Sickness Benefit, and the Canada Recovery Caregiving Benefit) and the temporary changes to the Employment Insurance program continue to provide financial assistance to households directly affected by the coronavirus pandemic and are expected to provide some level of support to credit performance in structured finance transactions. Canadian term ABS transactions benefit from strong obligor profiles. However, DBRS Morningstar expects the risk of higher delinquencies and losses to continue when government support is eventually eliminated. The extent of the impact will depend on the pace of economic recovery.

The outstanding ABS and ABCP notes were well enhanced as of May 2021. DBRS Morningstar closely monitors the performance of all transactions and will provide updates to the market.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The report is available at www.dbrsmorningstar.com.

For more information on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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