Sunday, 2 December 2007

ABCP decline reaches $371 billion

The total amount of Asset Backed Commercial Paper (ABCP) to disappear since early August has now reached $371 billion. That represents a 31% decline from the August peak of $1,195 billion to the total as at 28 November of $824 billion. The total value of ABCP outstanding was last at these levels exactly 2 years ago. On 30 November 2005 total ABCP outstanding was $819 billion.

How far the decline goes is anyones guess but I doubt we've seen the last of the declines for some time. ABCP has become a dirty word, or should I say a dirty acronym. Noone wants to touch it and for good reason.

As an example this week HSBC rescued $35 billion from two SIV's the bank sponsored. HSBC tried to spin it as a positive saying that the move would "restore a degree of confidence in the SIV sector." As I said earlier in the week if there were any confidence in the SIV sector someone would be willing to buy their paper.

Also this week a money market fund run by the state of Florida for amongst other public institutions Florida's public schools, suspended redemptions after 64% of a $42 billion fund was redeemed in just 30 days. State records show that the fund invested $2 billion in structured investment vehicles and other subprime-tainted debt. About 20% of the pool is in ABCP. Coleman Stipanovich, executive director of the State Board of Administration commented that:

"There is no liquidity out there, there are no bids" for those securities.
Amen to that.