Macro & Market Views

Securitization in Focus: October 2026

Securitization in Focus: October 2026

Diamond Hill

Headlines

3Q26 Earnings Recap1

Numerous consumer asset-backed securities (ABS) sponsors reported third quarter results in late October, with earnings supporting a positive outlook for consumer credit.

Auto Lenders

  • Ally CEO Michael Rhodes shared “The higher-end consumers seem to have plenty of discretionary expenses" although there's a segment of customers that are involved in "cash sorting"—prioritizing where they're putting their dollars—"against that backdrop, unemployment is quite constructive..."
  • General Motors CFO Paul Jacobson said "When you look at a lot of the consumer sentiment surveys, they really have become disaggregated from consumer behavior on the ground… It's even evident in what we see in GMF, where no—noticeable shifts in delinquencies, defaults, etc. So, I think the consumer has held up remarkably well." Management indicated they will continue to monitor consumer sentiment but expect consumer conditions to remain stable.
  • M&T Bank management said "Gasoline prices remain high, but consumer spending has held up well in spite of energy shocks. We see households as having managed the shock by reducing spending in other areas."

Credit Cards

  • American Express CEO Stephen Squeri noted "Customer behavior looks very similar to what we've seen over the past year. Strong and consistent spend growth, especially in the T&E categories, balanced growth in line with spend, high retention rates, and excellent credit performance….US consumer spending was up 9.4% this quarter, reflecting the continued strength in our premium customer base."
  • Capital One CEO Richard Fairbank said "Credit has been improving relative just a little bit kind of every month or every quarter… we are in a very good place with respect to credit." Management has been “trimming on the margins of Discover's credit policies in areas where we are less comfortable with the resiliency of the underlying customers, like high-balance revolvers."
  • Bread Financial President and CEO Ralph Andretta reported "Consumer behaviors remained resilient, though spending was increasingly intentional. Higher credit quality cardholders remain a consistent source of strength, while consumers with lower credit risk scores showed greater selectivity in their purchasing patterns."

Consumer Resilience Meets Emerging ABS Risks2

  • Consumer credit remained a core discussion topic at the ABS East conference, but there was little evidence of widespread concern about a broad-based deterioration in household fundamentals. Rather, focus remains on bifurcation within the consumer cohort—prime/near prime versus non-prime borrowers, strong versus weak sponsors and disciplined versus aggressive underwriting. There was some concern around the potential impact of AI-driven employment shifts, particularly for white-collar workers, which could pose a risk to higher-quality borrowers over the long run.
  • Data center ABS remained a key discussion topic, with investors questioning the impact of power availability, technological obsolescence and long-term demand.
  • Discussions also focused on sponsor quality, servicing, workouts and credit enhancement protections. As newer asset classes enter the securitized markets, evaluating management quality and emphasizing downside protection become increasingly important.

In a near reversal from September, Treasury yields rallied and spread levels (with the exception of agency residential mortgage-backed securities) moved wider, symptomatic of the flight-to-quality trade in October. All major category spread sectors ended October at month-end highs for the year-to-date period.

Exhibit 1: October Flight to Quality: Treasury Yields Declined as Credit Spreads Widened

 Credit Card Asset-Backed SecuritiesAuto Asset-Backed SecuritiesNon-Agency Commercial Mortgage-Backed SecuritiesAgency Residential Mortgage-Backed SecuritiesInvestment Grade CorporatesHigh Yield Corporates
Dec 31 202532.553.7121.021.877.4268.1
Jan 31 202631.148.8111.715.772.5263.6
Feb 28 202629.949.3113.620.983.7292.8
Mar 31 202632.453.9119.123.988.7320.2
Apr 30 202632.451.6113.321.379.4274.7
May 31 202629.947.2108.922.071.3256.2
Jun 30 202626.244.3109.524.573.5264.4
Jul 31 202625.142.9110.831.077.8279.4
Aug 31 202628.144.7109.929.377.1260.9
Sep 30 202625.842.7110.343.279.7312.8
Oct 31 202637.054.0123.133.789.4344.7
       
YTD Minimum23.739.4105.313.870.6247.7
YTD Maximum37.056.4123.144.692.7344.7
YTD Average29.447.8112.024.978.0278.4
10-year Minimum16.224.169.47.070.6247.7
10-year Maximum263.1378.3347.9132.3381.11,099.1
10-year Average40.258.8123.737.9108.7368.4

Source: Bloomberg; data as of October 31, 2026.
 

Asset-Backed Securities Issuance1

  • ABS issuance increased modestly in October to $30.8 billion, compared to an average of $27.4 billion over the prior two months. Year-to-date issuance for 2026 ($314.8 billion) remains well ahead of similar time periods for 2025 ($300.1 billion) and 2024 ($304.0 billion). As year end approaches, issuance is expected to slow slightly, following a similar trend to 2025 (final two-month average of $24.3 billion) and ahead of 2024’s average ($8.6 billion).
     
  • Auto ABS remains the dominant sector from an issuance standpoint, representing more than half of October’s issuance (53.2%). Data center/fiber represented nearly 15% of new issuance with six new data center deals and three fiber deals, and credit card and equipment coming in at 10.4% and 7.2%, respectively. 

Exhibit 2. Asset-Backed Securities Issuance Remain Strong Year to Date

 

Exhibit 3. Breakdown of Asset-Backed Securities Issuance Year to Date

 

Commercial Mortgage-Backed Securities (CMBS) Trends in October3

Sector trends

  • Delinquency rate. Year over year +0.41% (7.46% to 7.87%).
  • Serious delinquency rate. -0.16% month over month (7.87% to 7.71%). Represents the percentage of loans that are 60+ days delinquent, in foreclosure, real estate owned or non-performing.
  • Office led new delinquencies during the month, with the largest newly delinquent loans including an office property in Los Angeles and an apartment property in the San Francisco area.


By property type level

  • Multifamily. +0.05% to 8.09%.
  • Office. +0.17% to 12.33%.
  • Lodging. -0.24% to 5.94%.
  • Retail. +0.63% to 7.21%.
  • Industrials. -0.04% to 1.10%.


Issuance

  • Year-to-date non-agency CMBS supply reached $149 billion, surpassing 2024’s full-year total of $112 billion and running 16% ahead of the same period in 2025.

 

Exhibit 4: Overall Delinquencies Climbed in September, Maintaining the Up and Down Monthly Trend

 

Exhibit 5: Year-to-Date Non-Agency Commercial Mortgage-Backed Securities Issuance

 

Non-Agency Residential Mortgage-Backed Securities (RMBS)4

Non-agency RMBS issuance reached $203 billion year-to-date through October, up 19% from the same period in 2025 and 67% from 2024. Non-qualified mortgage (non-QM) issuance has been the main driver of growth, increasing 54% from 2025 and a staggering 173% from 2024 levels. As a reminder, non-QM RMBS do not meet guidelines set forth by the Consumer Financial Protection Bureau and offer more flexibility for eligibility and documentation criteria.

Meanwhile, issuance in the other category, primarily consisting of home equity lines of credit, home equity loans and reverse mortgages, has slowed to levels in line with 2025 but remains well above 2024.

Exhibit 6. Non-Agency RMBS Issuance

 

 

Exhibit 7. Breakdown of RMBS Issuance

1 Source: Barclays; data as of October 23, 2026.
2 Source: Barclays; data as of October 22, 2026.
3 Source: Trepp; data as of October 31, 2026.
4 Source: Deutsche Bank; data as of October 31, 2026.  

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