The ABCP Matterhorn is getting taller.
Or, developing a gorge on its right-hand side.
Spotted by Alea – an update on the amount of asset-backed commercial paper outstanding:
The last time FT Alphaville presented that chart, in May 2008, the figure was hovering around the $600bn mark. We noted then that the plunge in ABCP outstanding signified a wholly broken market.
The conduits which had kept the ABCP market lubricated were gone. Without them, it was left to central banks to step in. In 2008, for instance, some €711bn worth of securitisations were estimated to have been created in Europe, with about €675bn being retained for central bank repos.
Fast forward almost a year.
The market is even more broken. And central banks, for the most part, are still stepping in to replace it.
What’s more, the banks have cottoned onto this fact — securitisations created specifically for central bank collateral appear to be rife. From JP Morgan’s Ares CLO to the Lehman Bros Freedom CLO villified in Anton Valukas’ report, in the States, to mortgage-backed securities in Europe.
Meanwhile, the ABCP Matterhorn is getting steeper; and central banks’ commitments are getting bigger. Central banks are undoubtedly aware of this. Witness the Bank of England’s recent effort to deter “phantom securities” — stuff created purely for use in central bank operations — and the European Central Bank’s efforts to gradually wind-down its various liquidity programmes.
It looks like repairing the market in its entirety remains a mountain-sized task.
Related links:
Germany’s Bank-Asset-Berg – FT Alphaville
Phantom securities at the BoE – FT Alphaville
Lehman alone in its Fed-Freedom CLO bid? – FT Alphaville