NEW YORK -

Looking through the prism of the public asset-backed securities market (ABS), both S&P Global Ratings and Kroll Bond Rating Agency (KBRA) spotted deterioration when analysts examined subprime auto financing.

However, the softening didn’t trigger an extreme reaction from experts, with some pointing to some seasonality still playing a role.

Beginning with the latest update from S&P Global Ratings, analysts there said extensions on subprime retail installment contracts rose for the third consecutive month in November, increasing 28 basis points to 4.06%. Analysts indicated this reading marks their highest level since July when it stood at 5.29%.

Meanwhile, S&P Global Ratings pointed out that extensions on public prime issuances also moved higher, ticking up 3 basis points to 0.55%. That stopped streak of declines in the prime segment for six consecutive months.

Despite the increases, analysts acknowledged these levels remain significantly below April’s peak levels of 15.75% and 5.76% for subprime and prime, respectively.

Looking closer at the subprime data, S&P Global Ratings spotted a connection of extension rates and rising cases of COVID-19 cases per 100,000 people as tracked by John Hopkins University.

Analysts noted that within subprime, Wyoming and North Dakota had the second- and third-highest extension rates of 5.49% and 5.37%, respectively, in November. And John Hopkins University reported those states the third-highest and highest rates of people becoming infected with the coronavirus during that time.

“We believe contributed to the high extension rates,” S&P Global Ratings said.

In prime, S&P Global Ratings mentioned the states/territories with the highest extension rates in November included New Mexico (1.05%), Wyoming (0.91%), Mississippi (0.85%), Washington D.C. (0.81%) and Texas (0.77%). And all five reported month-over-month increases in cases of COVID-19, according to John Hopkins.

KBRA index readings

The newest KBRA readings showed some seasonality even during the pandemic.

Analysts said in their newest report that early stage delinquencies in the KBRA Prime Auto Loan Index climbed 2 basis points month-over-month to 0.97% in December, while late-stage delinquencies increased 3 basis to 0.38%.

Furthermore, early and late-stage delinquencies in the KBRA Non-Prime Auto Loan Index jumped to 7.37% and 4.22%, respectively, representing increases of 48 basis points and 32 basis points versus the previous month.

However, KBRA pointed out that both delinquency metrics remained “meaningfully” lower on a year-over-year basis, while annualized net loss rates remain “well below” pre-pandemic levels. Analysts explained those assertions arrived as a result of a “strong” used-vehicle market and low delinquency rates throughout the spring and summer months.

“Moreover, recoveries on a large number of loans charged off early in the pandemic were delayed until later in the summer and fall because of repossession moratoriums, another factor that kept annualized net losses from rising in recent months,” KBRA said.

“Seasonal trends typically push delinquency rates to their highest levels in December and January as borrowers use excess cash on holiday spending,” analysts continued.

“However, with tax refund season now approaching and with lawmakers reaching a deal on another round of federal stimulus in December—with the prospect of additional stimulus now that the Democrats control both chambers of Congress — we expect auto loan credit metrics to continue to remain in check for the time being,” analysts went on to say.

KBRA closed its latest update with its usual look at Reg ABS II asset-level disclosures. For December, analysts discovered a mix credit metrics.

Analysts noticed that the percentage of prime and non-prime contract holders who went from more than 30 days delinquent to current came to 30.8% and 27%, respectively. Compared to the previous month, those readings were 244 basis points lower in prime pools and 312 basis points in non-prime pools.

KBRA said those movements pushed those readings back to their pre-pandemic levels.

Meanwhile, analysts added the percentage of prime contract holders who rolled from more than 60 days past due to charge-off dropped to 14.5%, down 65 basis points, while the non-prime roll rate into charge-off increased 79 basis points to 22%. The latter metric also returned to pre-pandemic levels, according to KBRA.