INTRODUCTION Contributed by: Tamara Box and Sarah Caldwell, Reed Smith
In Europe, collateralised loan obligations (CLOs) surged, with the market on track to surpass 2021’s record of EUR39 billion in issuance. This high volume reflects robust demand and spread compression in investment-grade tranches, highlighting a renewed investor appetite for CLOs across both core European economies and emerging market segments. The synthetic securitisation sector in Europe, primarily focused on transferring corporate loan risk in the bal - ance sheets of French and German banks, saw consistent growth due to favourable regulatory adjustments that reduced capital charges for banks issuing these securities. Australia’s securitisation market experienced unprecedented growth in 2024, with issuances exceeding full-year 2023 levels by the third quar - ter (full-year 2023 issuances being approximately AUD35 billion, and Q3 2024 issuances surpass - ing AUD37 billion). This record-setting pace has been fuelled by substantial foreign investment, particularly in mezzanine tranches, reflecting an increased appetite for Australian RMBS and ABS products. The Australian market’s diversification into non-mortgage ABS, such as asset-backed securities linked to personal loans, has added depth to the sector and is likely to continue into 2025 as investors seek high-yield opportunities amid favourable macro-economic conditions. The securitisation market in India remains on a strong growth trajectory, driven by high demand for infrastructure financing in urbanising regions. Public-private partnerships and regulatory poli - cies geared towards infrastructure investment have attracted capital to transportation and energy projects, which in turn support secu - ritisation volume growth. India’s focus on infra - structure securitisation within the Asia-Pacific region notably aligns with broader trends, with a
10% compound annual growth rate anticipated through 2025. As for Latin America, Brazil takes the lead in securitisation issuance, accounting for over 80% of the volume for 2024. Predictions of market- wide issuance in Latin America now forecast a record high of approximately USD29.4 billion in 2024, with demand largely driven by local inves - tors and supported by government-backed pro - grammes encouraging funding for infrastructure and consumer credit. Emerging economies are also increasingly tapping into sustainable secu - ritisation to attract foreign capital, particularly in green projects. Financial inclusion initiatives, such as microfinance securitisations in India and Kenya, are another significant trend, with local banks and non-banking financial institutions looking to structured finance solutions to fund small businesses and low-income borrowers. As regulatory frameworks evolve, securitisation may become a vital instrument for financing sus - tainable development, addressing funding gaps and spurring economic growth. Interest Rates, Inflation and Delinquency Interest rates and inflation have had a significant impact on the securitisation markets. In 2024, central banks across major economies, includ - ing the US Federal Reserve, the Bank of England and the European Central Bank (ECB), grappled with rate hikes designed to control inflation. These rate hikes significantly influenced the refinancing landscape and delinquency rates, particularly in consumer-focused ABS sectors like auto loans and personal credit. In the US, ABS delinquency rates rose in response to higher borrowing costs, with sub- prime auto loans facing among the highest default rates in a decade. The recommencement of student loan payments, combined with dwin -
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