Revisions of September 2007, for July 2005-June 2007
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.
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 Organizations (FOI) agency ABS holdings increased relative to overall agency ABS holdings (FOI holdings accounted for 31% of overall Agency ABS holdings as of June 2006, compared with 24% as of June 2005) and (3) the identification procedures relating to ABS asset-class breakouts were improved.
The accompanying table (09/18/07) shows the revised monthly prepayments, as compared with the previous estimates. From July 2005 - June 2006, interpolation was used to estimate the increase in foreign-held ABS securities, based on the known holdings as of June 2005 and 2006. Estimates for July 2006 - June 2007 were revised based on the higher share of ABS holdings observed in June 2006, with the assumption that foreign holdings of ABS securities continued to grow but at a much more moderate rate, reflecting recent market conditions and asset class growth. 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.