The global asset-backed
commercial paper (ABCP) market will face a challenging environment in 2008 as economic pressures and asset quality concerns weigh on global capital markets, says Fitch Ratings.

The rating agency does not anticipate macro issues to directly result in negative rating actions in the ABCP markets, given the credit and structural protections afforded in traditional ABCP programs. However, it says, that the negative outlook Fitch has assigned for ratings on U.S. banks could translate into sponsor, liquidity provider, and counterparty rating actions, which could in turn affect ABCP ratings.

Over the course of 2008, Fitch anticipates traditional programs, particularly bank-sponsored multisellers backed by 100% liquidity support, to benefit from renewed investor receptiveness.

Funding pressures are expected to persist for some issuers though, particularly nontraditional structures, and any remaining alternative liquidity structures that are in the process of winding down.

Concerns over the regulatory climate will also continue to loom over the industry, particularly related to risk-based capital rules and Basel II, it says.

Fitch expects a negative-to-stable growth trend in 2008.