Revisions of April 2008, for July 2006-February 2008
Using the June 2007 Report of Foreign Holdings of U.S. Securities (TIC Form SHLA) data as a basis, revised estimates of asset backed securities (ABS) prepayments dating from July 2006 - February 2008 have been compiled. The results show that on average, Agency ABS prepayments were previously underestimated by about $684 million per month and corporate ABS prepayments were underestimated by about $2.1billion per month.
In addition to the above-mentioned revisions, the "of which" category providing the breakout of Foreign Official Organizations (FOI) agency ABS was also adjusted to reflect the most current holdings ratio. This estimate is a subset of, not an addition to, the agency ABS repayment estimates. The percentage of FOI agency ABS holdings is calculated directly from the Form SHL(A) data.
These revisions are based on the following factors: (1) foreign holdings of U.S. asset-backed securities, particularly corporate asset-backed debt securities, increased more than expected during this period, (2) the percentage of Foreign Official Institutions (FOI) agency ABS holdings increased relative to overall agency ABS holdings (FOI holdings accounted for 42% of overall Agency ABS holdings as of June 2007, compared with 31% as of June 2006) and (3) the identification procedures relating to ABS asset-class breakouts were improved.
The accompanying table (04/30/08) shows the revised monthly prepayments, as compared with the previous estimates. From July 2006 - June 2007, interpolation was used to estimate the increase in foreign-held ABS securities, based on the known holdings as of June 2006 and 2007. Estimates for the July 2007 - February 2008 Agency ABS were revised based on the higher share of holdings observed in June 2007, with the assumption that foreign holdings of agency ABS will continue to grow but at much more moderate rate, reflecting recent market conditions and regulatory changes. Therefore, an adjustment factor is used to estimate the share of ABS in the TIC Form S data on purchases to offset the impact that prepayments have on the share of foreign holdings. Estimates for the July 2007 - February 2008 Corporate ABS were revised based on the higher share of holdings observed in June 2007, however no adjustment factor was applied due to the assumption that foreign holdings of corporate ABS will slowly contract, reflecting recent market conditions and asset class revaluation.
Estimated Principal Repayments for Asset-backed Securities (ABS)
Using the June 2006 Report of Foreign Holdings of U.S. Securities (TIC Form SHLA) data as a basis, revised estimates of asset backed securities (ABS) prepayments dating from July 2005 - June 2007 have been compiled. The results show that on average, Agency ABS prepayments were previously underestimated by about $370 million per month and corporate ABS prepayments were underestimated by about $800 million per month.
Estimated Principal Repayments for Asset-backed Securities (ABS), including mortgage-backed securities (MBS)
Revisions of August 15, 2006, for July 2004-May 2006
Based upon the June 2005 Report of Foreign Holdings of U.S. Securities (TIC Form SHLA) data, revised estimates of asset backed securities (ABS) prepayments dating from July 2004 - May 2006 are provided. On average, Agency ABS prepayments were previously underestimated by about $1 billion per month and corporate ABS prepayments were underestimated by about $2.7 billion per month. The accompanying table (08/15/06) shows the revised monthly prepayments, along with the previous estimates.
These revisions are based on the following factors: (1) foreign holdings of U.S. asset-backed securities, especially corporate asset-backed debt securities, increased more than expected during this time frame and (2) the identification procedures relating to ABS asset-class breakouts were improved, leading to a higher estimated level of corporate mortgage-backed securities.
From July 2004 - June 2005, interpolation was used to estimate the increase in foreign held ABS securities, based on the known holdings as of June 2004 and June 2005. July 2005 - May 2006 data were revised based on the assumption that current foreign holdings of ABS securities will continue to grow due to favorable market conditions and asset class growth. As part of this assumption, an adjustment factor is used to estimate the share of ABS in the TIC Form S data on purchases to offset the impact that prepayments have on the share of foreign holdings.
Estimated Principal Repayments for Asset-backed Securities (ABS), including mortgage-backed securities (MBS)
Revisions of September 16, 2005, for July 2002-June 2005
Based upon the results of the benchmark survey of Foreign Portfolio Holding of U.S. Securities at End-June 2004, revised estimates are provided for asset backed securities (ABS) repayments dating from July 2002 to June 2005. The June 2004 survey revealed that foreign residents had both increased their holdings of debt securities more than estimated and increased the proportion of ABS debt securities relative to total holdings of debt securities. Revised monthly estimates of holdings and repayments were derived for July 2002 - June 2004 using: the 2004 benchmark data; revised TIC S monthly purchase estimates; and an interpolation procedure that reflects the higher purchases of ABS securities needed to both reinvest principal returned as repayments and increase foreigner's share of holdings in the form of ABS debt.
Estimates of repayments for the period July 2004 through June 2005 were also revised, using the June 2004 benchmark data as a starting point and a revised procedure that includes adjustment factors to TIC S purchases, by ABS security type, to reflect the higher percentage of ABS purchases by foreigners (relative to all debt securities of that issuer type) needed to replace portions of their holdings eliminated by principal repayments. This revised procedure will continue to be used in estimates for subsequent months. In addition, to further improve future estimates the annual survey (SHL) respondent-panel has been expanded and structured to include more issuers of ABS securities, making it possible to better track and revise the repayment estimates annually.
The revised repayment estimates for July 2002 - June 2005 are shown in the table (PDF) (09/16/05), along with the previous estimates. The new estimates of average Agency ABS repayments are about $1.1 billion per month higher then the previous estimates. The new estimates of corporate ABS prepayments are about $1 billion per month higher then the previous estimates.