Fitch: External Factors May Impede Structured Finance Outlook
Fitch Ratings said according to its U.S. structured finance 2014 outlook report U.S. structured finance is poised for a Stable Outlook in 2014, though numerous external factors may stunt performance somewhat in the coming year.
For one, the regulatory environment remains in flux, the overhang of which will continue to challenge to structured finance. ‘Regulators have made progress on some outstanding issues stemming from legislation passed in the wake of the financial crisis,’ said managing director Michael Dean. Fitch expects resolution on some fronts in 2014 with implementation likely in later years. One point of concern is the proposed risk retention rule, which if implemented in its current form could have consequences for new CLO issuance.
Another looming issue is the potential ripple effect of Fed Tapering. That coupled with the inevitability of higher interest rates will be felt across all sectors albeit to varying degrees. Longer term, higher interest rates will likely be felt most profoundly in CMBS seeing as refinancing needs could pressure existing transactions.
Political issues also continue to fester. Fitch maintains that repeated budget and debt limit standoffs are not likely to impact performance acutely across most structured finance sectors. More peripherally, however, ‘any broader macro declines triggered by this crisis-to-crisis governing could create some performance drags, most notably with FFELP student loan ABS,’ said Dean.
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