Securitized Update: Rising Rates and Mixed Credit Trends

October brought a shift in securitized markets as Treasury yields declined and credit spreads widened amid a flight to quality. Despite changing market conditions, issuance remained strong, while consumer credit fundamentals continued to show resilience.

Consumer Credit Holds Steady^1,2

Third-quarter earnings from major consumer lenders painted a generally positive picture of household credit. Auto lenders and credit card issuers reported stable credit performance and resilient spending, particularly among higher-quality borrowers. However, signs of more selective spending among lower-quality consumers reinforced the growing divide across borrower segments.

This divergence was also a central theme at the Asset-Backed Securities (ABS) East conference, where discussions focused on underwriting discipline, sponsor quality and downside protection. Emerging sectors, including data center ABS, raised additional questions around power availability, technological obsolescence and long-term demand.

Issuance Remains Robust¹

ABS issuance reached $30.8 billion in October, bringing year-to-date volume to $314.8 billion, ahead of comparable periods in 2024 and 2025. Auto ABS accounted for more than half of October's issuance, while data center and fiber transactions represented nearly 15%.

Non-agency residential mortgage-backed securities (RMBS) issuance also continued to accelerate, reaching $203 billion year to date, up 19% from 2025, driven largely by non-qualified mortgages.

Commercial Real Estate Pressures Persist^3,4

Commercial mortgage-backed securities (CMBS) delinquencies remained elevated, with the overall delinquency rate reaching 7.87% in October. Office properties continued to face pressure, while non-agency CMBS issuance climbed to $149 billion year to date, 16% ahead of 2025.

As securitized markets evolve, resilient issuance and uneven credit trends underscore the importance of disciplined underwriting and security selection.