KBRA releases its 2026 ABS Sector Outlook, which highlights key market and performance themes observed in 2025, along with collateral performance trends and forecasts for 2026, as well as surveillance activity.

Despite headwinds from affordability pressures and ongoing credit normalization, overall ABS market issuance is expected to maintain strong momentum. Robust investor demand, supportive monetary policy, and a diverse pipeline of traditional and emerging asset types should underpin another year of healthy issuance and generally stable performance across the ABS landscape.

Some key takeaways from the report include the following:

• Record Issuance: ABS issuance is expected to reach another post-global financial crisis (GFC) record in 2026, with total new issue volume forecast at approximately $385.2 billion, representing a roughly 5% year-over-year (YoY) increase from 2025. The expansion reflects continued investor demand and solid origination pipelines across several major asset classes.
• Diverging Sector Trends: Issuance trends will diverge at the sector level. Auto, student loan, and equipment ABS volumes are poised to rise, while credit card and solar sectors are expected to contract. Consumer loan ABS should remain largely flat as tighter underwriting and credit caution temper growth. Across commercial segments, aircraft and data center ABS are positioned to benefit from improved asset yields and strong investor demand, while whole business securitizations (WBS) issuance is likely to decline amid reduced refinancing activity.
• Macro Backdrop: The macro backdrop remains supportive but softer than in recent years. The Federal Reserve estimate for U.S. GDP growth is near 2%, with unemployment edging higher to about 4.3%, and inflation staying above the Fed’s 2% target. The rate-cutting cycle that began in late 2025 is expected to continue through mid-2026 if inflation trends closer to the Fed’s target and the labor market continues to soften. Lower rates should help ease borrowing costs and sustain credit formation.
• Credit Fundamentals: Credit conditions are stabilizing after a period of normalization. Household delinquencies and charge-offs have risen from post-pandemic lows but at a slower pace, supported by healthy consumer balance sheets and moderating inflation. Credit performance across ABS sectors remains generally solid, although subprime auto and unsecured consumer loans continue to exhibit the most stress. Divergence in performance between subprime and prime may increase as the so-called “K-shaped” economy provides broad support for the latter.
• Surveillance Activity: Ratings remained broadly stable through October 2025, with 77% affirmations, 19% upgrades, and 4% downgrades—mainly in non-prime auto and solar ABS. Investment-grade (IG) ratings were more stable (KBRA Stability Ratio (KSR) of 98%) than non-IG (KSR of 90.8%), and upgrades outnumbered downgrades by 4.8 to 1. Broad rating stability is expected to continue into 2026 as rate relief supports performance.

KBRA has streamlined the Outlook format this year to enhance the reader experience. We welcome any feedback or comments.

Click here to view the report.

About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

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