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Fiscal Cliff Threatens ABS Market

fiscalCliffStrengthening performance and issuance tailwinds in most U.S. structured finance sectors are likely to push growth further in 2013, according to Fitch Ratings in its outlook report. However, one key area to watch in the coming year will be the potential drag created by fiscal cliff-related issues.

The consumer asset-backed securities sector, which includes auto ABS, would be the most adversely affected by any resulting increase in unemployment and taxes. That said, Fitch believes the auto and credit card sectors are well positioned to withstand additional stress given the current very low level of delinquencies and losses.

The commercial real estate and corporate sectors may be impacted by increased tax rates, reduced spending and a decline in the growth of GDP.

Unresolved regulatory issues also have to potential to hold back the speed of the market's recovery.