As we head into the inevitable slowdown in market issuance over a hot European Summer, we review another record-breaking year to date of issuance in European ABS, with Australian markets not far behind their record pace.
2026, like 2025, began with elevated macroeconomic uncertainty. Over the first quarter, credit spreads widened across sectors as investors grappled with the dual headwinds of AI-led disruption and a volatile geopolitical environment with escalating tensions in the Middle East boiling over into a full-blown conflict. However, despite the potentially severe impacts on global growth and inflation from a protracted conflict, market moves have remained relatively contained compared with the dislocation experienced last year following Liberation Day. Secondary market demand remained healthy with elevated auction volumes matched with strong investor participation leading to increased supply being well absorbed and again demonstrating the resilience and liquidity of the asset class.
In European ABS markets, despite the macro volatility in March, new issuance continued, albeit with wider spreads than the start of the year and a reliance on premarketing/preplacement for some transactions. This was notably different to period post tariff announcements in 2025 when new issuance took a pause for a couple of weeks. H1 public issuance reached €56bn, a 22% increase year on year, prompting several sell-side research houses to raise their full-year issuance forecasts to comfortably above €100bn. Notably, this would be a new post GFC high for European public ABS market issuance after 2025’s €95 bn. Issuance in the UK was dominated by RMBS including some large refinancings on legacy collateral and preplaced transactions giving Issuers more certainty during the volatility seen in March. Autos and Consumer ABS are the dominant collateral types seen from the Eurozone so far this year.
Australian issuance also tracking near record highs
In Australia, 2026 year to date public market issuance stands at €25bn – well ahead of year to date 2025 and close to H1 levels in 2024 which was the largest year of primary issuance on record. Pricing and coverage levels have been asset class / issuer dependent with considerable differences seen in investor support across deals. As seen in Europe, Q1 saw pricing widen driven by geo-politics, unsettling markets, and a more significant pause in issuance than in Europe. However, the rebound of supply in Q2 was notable with RMBS leading supply followed by Auto ABS. Recent tax changes affecting investor lending, together with new restrictions on SMSF borrowing, are likely to influence future non-bank lending volumes and, by extension, securitisation issuance. The full implications of these measures are still emerging and will take time to assess.
Spread widening was relatively constrained with a strong retracement to prior levels
Despite the temporary widening in spreads, strong technical demand drove a substantial retracement, with spreads largely returning to pre-conflict levels during Q2. Australian markets experienced a similar pattern, although took a longer period for spreads to return the pre-conflict levels. From a relative value perspective, ABS continues to be seen as attractive versus covered bonds and Investment grade corporates, with senior EUR tranches and BBB/BB mezzanine tranches remaining particularly compelling. While a heavier primary calendar may place some pressure on senior spreads during peak issuance periods, mezzanine tranches appear well supported by investor demand, continuing to see significant oversubscription levels in primary transactions and limited secondary supply. Looking ahead, H2 is expected to accelerate meaningfully post summer, with the traditionally active September and October issuance window likely to feature a broad range of issuers and collateral types.
Expectation for tiering in Asset Performance
Macro-economic uncertainty along with more credit stories (see below) continue to keep investors on their toes regards consumer and credit performance. That said, collateral performance has stayed resilient across most asset classes with structures able to absorb a moderate weaking in fundamentals. While some pockets of deterioration have been seen, overall, we expect ABS structures to remain robust. However, the prospect of some ratings downgrades remains if transactions continue to perform outside of rating agency assumptions.
New issuers and more established platforms are keen to come to public securitisation markets
A notable feature of 2026 has been the continued breadth of collateral and the increasing diversity of issuers accessing public securitisation markets.
The Global ABS conference in June saw market participants constructive on demand and market technicals, albeit alongside growing awareness of the disconnect between resilient financial markets and a more uncertain macroeconomic backdrop. A positive theme was the continued expansion of the issuer base, with several lenders with established lending histories but historically private funding models looking to access public ABS markets. The combination of stable-to-tightening spreads over the past 12 to 18 months and robust investor demand has encouraged issuers to diversify funding sources through public securitisation markets. This trend spans consumer and auto lenders as well as asset finance providers across both the UK and continental Europe. We view this broadening of issuer and asset class representation as supportive of long-term market depth and resilience, even if it contributes to a stronger supply pipeline and some near-term spread sensitivity.
A renewed focus on “G” in ESG
In Q1, UK bridge financing lender Market Financial Solutions (MFS) made the news with allegations relating to fraud and double pledging, causing significant write-downs for global institutions that had been providing financing to MFS through private facilities. This, combined with issues seen in non-prime auto lender Tricolor in the US in 2025, has put a spotlight on the governance aspect of private asset backed markets. The industry’s response has been constructive and collaborative. The ASF in Australia, AFME in Europe, and the SFA in the United States have each mobilised working groups to review existing frameworks and develop enhanced best practice. On the originator side, we have noted a constructive, collegiate response where issuers have been open and keen to work with investors to explain how they mitigate the risk of fraud including offering to provide greater transparency than they have shared previously. In our view, these developments should strengthen market confidence and governance standards over time.
What We’re Watching: Good Due Diligence Should Never Be Remote – Challenger Investment Management
Regulatory updates to come in Europe and the UK
The regulatory outlook for Securitised products in both Europe and the UK is overall positive. Market participants are watching developments closely for the remainder of the year regarding the following:
- Capital Requirements Regulation (CRR) updates aim to reduce capital requirements for bank investors.
- Simplified due‑diligence for EU investors on repeat/non-EUR ABS issuers could lower barriers to participation.
- Reporting template reforms may ease private deal reporting burdens.
- Solvency II changes finalised earlier this month should lock greater investor participation from 31 January 2027.
We note the UK authorities are looking to following a more principles-based regime versus a more formal farmwork to be retained in the EU and may be more impactful operationally for investors. However, collectively across both regimes, developments should improve funding conditions and make securitisation more attractive to a broader investor base albeit with a fluid timeline.
What’s in store for 2026 H2?
As highlighted in our outlook published at the start of the year, the depth and diversity of both the European and Australian securitisation markets continue to support the role of securitised credit as a strategic allocation within fixed income portfolios. The asset class offers diversification across jurisdictions, collateral types and issuer profiles while maintaining attractive liquidity characteristics. Combined with a constructive regulatory backdrop, collateral innovation and an expanding issuer base, we believe these factors will continue to reinforce market depth and opportunity. In this environment, securitised credit remains not merely a tactical allocation, but a durable, scalable and resilient cornerstone of fixed income portfolios both this year and well beyond.