Auto residuals could be next frontier in auto ABS, say Citi analysts

Auto residuals offer equity-like returns with less volatility, which makes them ideal for the next frontier in auto ABS, say analysts at Citi in their Global Structured Products Monthly. Manufacturers have not yet tapped the residual market to any great extent, yet the industry is strategically restructuring and seeking new ways to raise capital efficiently, they say. Auto residual issuance is likely to be part of an integrated manufacturing strategy to free up capital and would not be an opportunistic trade. The analysts believe auto residual issuance could grow in importance when currently dislocated credit markets recover.
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