The subprime consumer sector has come a long way since the dark days of the financial crisis. Borrowers, lenders and issuers have made improvements, but still subprime can’t seem to exorcize its reputational demons. I’ve seen a lot of news coverage recently that reinforces investors’ worst fears.
Subprime. It’s the eight-letter word that turned into something of a four-letter word during the 2008 global financial crisis. Even now, ten years later, that stink has not washed off. Investors have been eyeing subprime auto asset-backed securities (ABS) for signs of trouble, wondering if growing auto debt levels, rising interest rates, deteriorating performance and changing issuer composition could mean the next subprime storm is brewing.