Highlights of This Issue
Global ABS/MBS Markets 4
Mortgage-backed securities were launched in the US two decades ago. Today the USsecuritisation market continues to provide the highest volume and liquidity.However, the engine of growth for global securitisation is now in Europe and Asia.
Defining Securitisation 7
The terms structured finance and securitisation are usually used interchangeably,although the former is by definition broader and includes traditional asset-backedsecuritisations, as well as more creative and innovative financial and risk transfertechniques.
Structural and Legal Aspects of ABS and MBS 13
The securitisation process features many legal and structural features, whose mainobjective includes the separation of credit risk of the underlying assets from theoriginator’s credit risk, and achieving higher credit rating of the securitised bondsthan that of the assets’ originator and the asset pool.
Asset Classes and Basic Securitisation Structures 21
The different classes of assets determine the different securitisation structures thatare available in the market. Almost any asset type can be securitised if it meets somebasic conditions.
Rating Stability for ABS/MBS 27
ABS and MBS ratings remain more resilient. The caveat is the shorter securtisationmarket history, in comparison with the corporate bond market.
Originator’s Perspective: Securitisation Benefits and Drawbacks 29
The main benefits of securitisation for the issuer lie in the alternative off-balancesheet financing and balance sheet re-engineering, while possible drawbacks arerelated to the potential residual concentration of economic risk and over-reliance onsecuritisation.
Investor’s Perspective: Securitisation Investment Considerations 34
Constantly broadening range of investors are entering the securitisation market withthe banks and funds playing a major role. The benefits of securitisation areassociated with diversification, yield pick-up, exposure to new areas and creditstability.
ABS/MBS on Bloomberg 37
Bloomberg is an essential tool for the participants on the securitisation market, hencethe need to understand the related main screens and functions.
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4 September 2000
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Merrill Lynch & Co.Global Securities Research & Economics GroupFixed Income Strategy