The performance of the consumer loan ABS market in EMEA deteriorated in September, according to Moody's latest indices report for the sector.

Moody's gross default trend reached 1.93% in September, which is an increase of 0.5% from September 2008, and the delinquency trend increased to 0.86% in September from 0.60% one year previously. Moody's constant prepayment rate (CPR) trend continued its stable performance and stands currently at 13.1%. At present, 14 transactions have drawn on their reserve funds and three transactions in this market recorded a principal deficiency.

Olimpia da Silva, a Moody's associate analyst, says: "The performance of the EMEA consumer loan market is closely linked to labour markets and, hence, has been negatively affected by rising unemployment, which is expected to intensify given the time lag that labour markets have to economic cycles."

Worsening labour markets increase pressure on consumer loan pools and point to an increase in delinquencies and defaults. In Spain in particular, consumer loan pools are under increased pressure as a result of macroeconomic deterioration. Indeed, Moody's notes that the large majority of consumer loan ABS downgrades occurred in Spain due to weaker than expected collateral performance.

The Eurozone economy is slowly recovering from the recession, however. The French and German economies posted positive increases in GDP in Q209 and are likely to be followed by other European economies in Q309 and Q409. However, the recovery is likely to be slow.

Moody's outlook for consumer loan ABS in this region is negative.