Subprime auto loans packaged into Wall Street bonds are being watched for signs of stress in consumer credit as pandemic aid fades and the cost of living...
Wall Street has begun to see more borrowers with blemished credit fall months behind on their subprime auto loans, a potential sign of cracks emerging in consumer credit as the Federal Reserve moves to fight inflation.
Early indicators now point to a tougher road ahead, particularly for low-wage earners facing higher prices at the grocery store and gas pump, without the child tax credit or other pandemic aid to help.In February, the delinquency rate for subprime auto loans more than 60 days past due rose to 4.15%, the highest since April 2020 for loans packaged into asset-backed bond deals, according to Deutsche Bank.
Fitch Ratings also tracked February subprime auto ABS delinquencies at the highest since April 2020, but at a near 4.8% rate. The S&P 500 index SPX was down 5.5% on the year through Wednesday, while its energy sector was up nearly 40%, according to FactSet, pushed higher by U.S. oil prices CL00 above $114 a barrel.
“Any default is going to impact somebody’s credit significantly,” said Francis Creighton, president of the Consumer Data Industry Association, a trade group representing credit reporting bureaus and agencies.
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