Volkswagen has jumped into the driver’s seat of the European asset-backed securities market and put the key in the ignition. Plans for an issue of perhaps €500m or more in late September are another sign of recovering European financial markets. Indeed, spreads on auto securities are closing in on the pre-Lehman levels of 100 basis points over Euribor, after peaking at more than four times that level in March. For a market largely closed since last September, this is good news.

ABS’ crushed reputation makes them the junk bonds of the credit crunch, having suffered the same bubble and pop fate as their counterparts in the 1980s. But they remain a valid financial technology – albeit on a smaller scale and with tighter standards. Indeed, re-opening the ABS market will help speed broader economic recovery.