NEW YORK – Falling jobless claims are indicating a stabilizing labor market, which is good news for U.S. credit asset-backed securities, according to Fitch Ratings in its latest edition of ‘Credit Card Movers & Shakers’.
‘Initial jobless claims fell to 317,000, which bodes well for consumer sentiment and personal income going forward even as the Federal Reserve continues to raise rates,’ said Richard Drason, Director, Fitch Ratings. ‘With Fitch’s expectation of a 4% federal funds target rate by the end of 2005 taken into account, Fitch expects continued stable performance trends for prime credit card ABS, while the subprime segment’s Outlook remains Negative.’
The improving labor market also appears to be having a positive effect on bankruptcy filings as the 2004 total of 1,439,010 is 4.2% lower than the same time last year, this after Fitch reported 116,952 filings for November. ‘Fitch expects bankruptcy filings to close lower in 2004 to approximately 1.59 million as households benefit from the improving labor market and low interest rate environment,’ said Drason.
Prime chargeoffs increased 35 basis points (bps) to 6.08% for the October collection period, though it is still down 18 bps from this time last year. Subprime chargeoffs also climbed to 14.94%, but despite the 24 bp climb, is still 236 bps below last year’s levels. Excess spread rose 19 bps to 6.81%.
The latest edition of ‘Credit Card Movers & Shakers,’ which covers the latest trends in the credit card ABS market, is available on the Fitch Ratings web site at www.fitchratings.com in the ‘ABS’ sector page under ‘Newsletters’.
