ABS and its relevance in a soft landing environment

Over the last 12 months, European ABS has proven itself to be an attractive option for investors seeking stability and consistent returns in an environment where volatility has remained elevated. Floating rate bonds have been a very good place to find great income opportunities, as well as being an effective inflation hedge, given the coupons adjust higher in line with every rise in base rates.

Consensus is that we are close to terminal rates in the UK and Europe and the market is pointing towards a soft landing next year. In this scenario, the economic conditions for European ABS remains favourable as unemployment and corporate defaults are expected to stay low. This in turn could mean that we see central banks keeping interest rates at higher levels for longer, further supporting the return profile of the asset class.

Our most recent ABS Investor Update webinar, hosted by Douglas Charleston and Aza Teeuwen provided an outlook for the European ABS market and why they think investors should be considering the asset class as a long term investment in an environment where we have reached peak rates and a soft landing is expected. 

The update was followed by a Q&A session.