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The Future of Structured Finance: Trends and opportunities in a post-pandemic world

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Swift and decisive action by the Fed and the structural prudence in securitisation have helped contain the damage due to the pandemic in sub-investment grade notes. As markets begin to calm down and issuances picks up pace, there are pockets of opportunity, although caution is necessary.

This paper analyses how structured finance in the US is dealing with the impact of the pandemic, summarises key Fed/government announcements that have helped stabilise the market and illustrates the opportunities arising from the TALF 2.0 programme. The paper also identifies some key trends that will shape the future of credit landscape and their potential impact on securitisation.

Key Takeaways:
  • TALF 2.0 could provide attractive returns on AAA investments, subject to good entry and exit points
  • Lifestyle changes associated with the pandemic are going to alter demand for household credit, and commercial-credit trends – such as accelerated adaptation of internet, redeployment of supply chains, increased ESG concerns – are going to create unique opportunities and challenges for various structured-finance asset classes
  • We expect elevated levels of uncertainty around the social, economic and political environment, at least in the short run.
  • Capital-market participants should be prepared to break old moulds and adapt to the changing landscape