U.S. consumer ABS issuance hits a record, while MPL improvement reflects structural changes more than broad-based recovery among individual issuers

Overview

This report is Morgan Stanley's July 2026 North American ABS strategy dashboard. It focuses on the vintage performance of U.S. unsecured consumer loan/MPL ABS and covers issuance, spreads, auto loan ABS, credit card ABS, solar loan ABS, and U.S. consumer health indicators. The report's core conclusion is that primary ABS supply remains very strong, but credit performance differs materially across consumer ABS subsectors; the improvement in overall MPL delinquency rates cannot simply be attributed to broadly tighter lending standards, and has instead been significantly influenced by new low-delinquency shelves entering the market and gaining share.

Core views

The report views the MPL 2025 vintage as the strongest in recent years on an aggregate basis, but when broken down by individual large shelves, it does not consistently outperform all historical vintages. Therefore, the aggregate improvement cannot be directly interpreted as a simultaneous improvement in underwriting standards across all lenders. New shelves launched since 2021 represent approximately one-quarter of outstanding unsecured consumer loan balances, and these new shelves have below-average delinquency rates, driving the overall 60+ day delinquency curve lower. Meanwhile, ABS supply reached a record, and consumer ABS spreads finally widened modestly in June after a prolonged tightening trend. Subprime auto and solar loans remain the areas with the most notable credit risk.

Analysis framework

The report uses an ABS market dashboard approach, combining primary issuance, outstanding balances, trading volume, spreads, delinquency rates, default rates, loss rates, prepayment speeds, and macro consumer indicators. For MPL, it uses vintage curves, shelf-level decomposition, and changes in market share to identify the sources of improvement in aggregate performance.

Methodology notes

• Credit performance analysisVintage curve analysis

  Comparing delinquency and default performance by origination year and transaction seasoning

  By comparing delinquency and default rates for different MPL, auto loan, and solar loan vintages at the same seasoning point, the report assesses whether newer asset pools have improved or deteriorated relative to historical vintages.

• Structural attribution analysisShelf-level market share decomposition

  Distinguishing improvement in individual issuer performance from changes in sample composition

  The report ranks the current top 50 MPL shelves by outstanding balance and identifies shelves added since 2021, assessing whether their 60+ day delinquency rates are below the overall average to explain the source of improvement in the aggregate curve.

• ABS market monitoringIssuance and spread dashboard

  Tracking primary issuance supply, outstanding balances, secondary trading, and spread changes

  The report combines monthly and quarterly ABS issuance, the consumer/commercial supply mix, secondary spreads, and trading volume to assess the supply-demand and credit risk pricing environment.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• MPL ABS

  The report's core focus, particularly unsecured consumer loan and Marketplace Lending transactions.

  Strengths

  The 2025 vintage performed better overall than historical vintages, 60+ day delinquencies declined to 2.66%, and the addition of new low-delinquency shelves improved overall quality.

  Weaknesses

  Individual large shelves did not consistently improve, the 3-month CDR rose to 9.11%, and low-FICO shelf delinquencies continued to increase.

  Comparison

  Compared with auto ABS, changes in overall portfolio composition are more favorable to aggregate MPL metrics.

  Risks

  If the growth of new low-delinquency shelves slows or legacy shelves deteriorate, the improvement in the overall curve may prove difficult to sustain.

• Prime Auto ABS

  A comparison segment for consumer ABS credit performance.

  Strengths

  60+ day delinquencies remained stable at 0.48%, and the 3-month CDR improved modestly to 1.46%.

  Weaknesses

  Spreads widened by approximately 8bp in June from their May lows, indicating that supply pressure was beginning to affect pricing.

  Comparison

  Credit performance was materially better than subprime auto.

  Risks

  If consumer fundamentals weaken, the low delinquency level may face mean-reversion pressure.

• Subprime Auto ABS

  An important segment for monitoring consumer credit pressure.

  Strengths

  The 3-month CDR and loss rate improved somewhat in June.

  Weaknesses

  60+ day delinquencies rose to 5.47%, and AAA spreads widened by approximately 13bp from their May lows.

  Comparison

  Performance remained weaker than prime auto and continued to be a major source of credit differentiation.

  Risks

  If the seasonal increase extends into non-seasonal deterioration, it could pressure lower-rated bonds and new-issue pricing.

• Credit Card ABS

  A relatively stable segment within consumer ABS.

  Strengths

  60+ day delinquencies declined to 1.17%, charge-offs declined to 3.01%, and the monthly payment rate remained stable at 41.53%.

  Weaknesses

  Against a backdrop of rising consumer debt, payment rates and charge-offs still need to be monitored for a potential reversal.

  Comparison

  Short-term indicators were better than those of solar loan ABS and subprime auto.

  Risks

  Rising unemployment or income pressure could feed through to credit card delinquencies and charge-offs.

• Solar Loan ABS

  The higher-risk consumer lending segment covered by the report.

  Strengths

  Vintage and prepayment data remain available for monitoring.

  Weaknesses

  30-day delinquencies rose to 0.91%, the 3-month CDR rose to 4.59%, and the annualized net loss rate rose to 5.30%.

  Comparison

  The 2024 and 2025 vintages continued to underperform earlier vintages and performed worse than most consumer ABS segments.

  Risks

  Continued increases in defaults and losses could consume credit enhancement and widen investors' risk premia.

• Digital Infrastructure ABS

  A growth segment within commercial and alternative ABS.

  Strengths

  Data center and fiber transactions became active again in June, with transactions from QTS, Aligned, Uniti, and FirstLight driving supply; demand was positive and new-issue spreads tightened.

  Weaknesses

  The sector remains relatively new, with limited historical performance and stress-cycle data.

  Comparison

  Unlike consumer ABS, the report describes demand as stronger and spreads as tighter.

  Risks

  Valuations are sensitive to assumptions regarding long-term cash flows, the financing environment, and infrastructure demand.

Key data

• 2Q26 ABS issuance$117bnQuarterly record, up 6% from 1Q26.
• Year-to-date 2026 ABS issuance$228bnUp 26% from the same period in 2025.
• June 2026 ABS issuance$37bnBelow May but still 20% higher than June 2025; consumer supply was $24.5bn and commercial supply was $12.5bn.
• Share of new MPL shelves added since 2021Approximately 26%Measured by current outstanding unsecured consumer loan balances.
• New shelves among the current top 25 MPL shelves10, approximately 22% of the totalAll of these shelves added since 2021 have below-average delinquency rates.
• Prime auto 60+ day delinquency rate0.48%Stable in June.
• Subprime auto 60+ day delinquency rate5.47%Rose 20bp in June, in line with historical seasonality.
• Prime/Subprime auto 3-month CDR1.46% / 12.67%Prime declined 1bp, while subprime declined 7bp.
• Prime/Subprime auto loss rate0.58% / 7.97%Both declined 1bp in June.
• MPL 60+ day delinquency rate2.66%Declined 7bp in June.
• MPL high-FICO/low-FICO shelf performance4.15% / 2.05%High-FICO shelf delinquency declined 13bp month-over-month, while low-FICO shelf delinquency rose 4bp.
• MPL 3-month CDR9.11%Up from 8.94% in May, an increase of 17bp.
• MPL prepayment speed34.81%Above 34.50% in May.
• Credit card ABS 60+ day delinquency rate1.17%Down 9bp month-over-month in June.
• Credit card ABS charge-off rate3.01%Declined 7bp in June.
• Credit card ABS monthly payment rate41.53%Essentially stable versus 41.55% in May.
• Solar loan ABS 30-day delinquency rate0.91%Rose 4bp in June, returning to the April level.
• Solar loan ABS 3-month CDR4.59%Up 33bp from 4.26% in May.
• Solar loan ABS annualized net loss rate5.30%Above 4.52% in May; the 2024 and 2025 vintages continued to underperform earlier vintages.
• U.S. consumer health indicatorsUnemployment rate 4.2%, initial jobless claims 215k, June nonfarm payrolls up 57kConsumer sentiment improved somewhat, with Michigan Consumer Sentiment rising to 49.5 and Conference Board Sentiment rising to 91.2.

Impact & implications

For investors, the improvement in aggregate MPL ABS metrics may overstate the broad improvement in the asset quality of individual legacy issuers, making shelf- and vintage-level decomposition increasingly important for credit selection. Record issuance means spreads may continue to face supply pressure, particularly as consumer ABS spreads have begun to widen modestly after a prolonged tightening trend. Subprime auto and solar loan ABS continue to warrant attention, while short-term credit card ABS indicators remain relatively stable.

Risks

• The overall improvement in MPL may be driven primarily by changes in sample composition rather than a simultaneous improvement in underwriting quality across all lenders.
• Record primary ABS issuance may continue to place supply pressure on consumer ABS spreads.
• Rising subprime auto delinquency rates indicate that lower-credit-tier consumers remain under pressure.
• Solar loan ABS defaults and net losses continue to rise, with the 2024 and 2025 vintages performing weakly.
• U.S. consumer debt continues to rise; if employment or income deteriorates, delinquencies in credit cards, autos, and MPL could increase.
• Changes in interest rates and prepayment behavior will affect the cash flows, duration, and valuation of ABS and related securities.

What to watch

• Whether the market share of new MPL shelves with low delinquency rates continues to increase.
• Whether the MPL 2025 vintage continues to materially outperform historical vintages at longer seasoning points.
• Whether delinquency curves for individual large MPL shelves begin to improve in tandem or diverge further.
• Whether new consumer ABS supply continues to pressure AAA and lower-rated spreads.
• Whether subprime auto 60+ day delinquencies exceed seasonal patterns.
• Whether the solar loan ABS 3-month CDR and annualized net loss rate continue to rise.
• Whether credit card ABS payment rates, charge-off rates, and 60+ day delinquencies remain stable.
• U.S. unemployment, initial jobless claims, wage growth, consumer sentiment, and household credit quality.