BMO's Securitization Group creates liquidity for previously illiquid assets (auto loans, student loans, etc.) at a lower cost than most traditional financing instruments. Virtually any monetary asset with a contractual payment flow can be securitized. This allows capital to be raised by companies with contractually committed future cash flows, such as royalties or other non-executory contracts. BMO can, in turn, provide investors with almost any level of risk, from AAA to non-investment grade. Dave Kucera and his Chicago-based team publish a monthly securitization newsletter.
Dr. Krause said, "It was a pleasure to sit down with Dave and talk about securitizations in the post-financial crisis era. As his most recent newsletter shows, ABS issuance is still occurring and currently is being led by auto loans. Given some of the actions of the federal government to support the securitization market, the yield spreads of AAA, 3-year ABS loans is at levels below that observed in the pre-Lehman period. It looks as if improving credit quality and a limited supply of ABS is steering investors toward lower tranched assets in order to obtain higher yields."