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US consumer ABS can withstand jobless spike-Fitch
NEW YORK, March 24 (Reuters) - U.S. asset-backed securities backed by consumer loans are unlikely to see widespread rating downgrades despite a rising unemployment rate, Fitch Ratings said on Monday.
Though a climb in the jobless rate is already triggering more losses on auto and credit card loans, credit enhancement and structural safeguards of asset-backed transactions will cushion their ratings, Fitch said in a report.
Top-rated consumer ABS, for example, could withstand unemployment levels not seen since the Great Depression, the agency said.
Fitch said it expects unemployment to rise steadily to 5.5 percent by year end from 4.8 percent currently. It would take a much sharper rise, however, to affect consumer ABS ratings.
Unemployment would have to rise to more than 20 percent to cause a first loss to the typical "AAA" rated credit card and auto ABS transactions, Fitch said. Typical "BBB"-rated securities could withstand an unemployment increase to more than 9 percent for auto transactions and 11 percent for credit card transactions, Fitch said.
The unemployment rate peaked at an estimated 24 to 25 percent range in 1933 but in the post-war period has not exceeded 10.8 percent, hit in 1982, Fitch said.
(Reporting by Dena Aubin)
