medium · Asset-Backed Securities waterfalls
A Credit Card Master Trust Series is evaluating its early amortization trigger. Over the last three months, the portfolio yield has been 19.0%, 18.5%, and 20.0%. The base rate (bond coupons plus servicing) is 7.5%. Monthly charge-offs were 12.0%, 13.5%, and 11.0%.
If the trigger is a three-month rolling average excess spread below 0%, has a breach occurred?
- Yes, because any single month of negative excess spread triggers immediate rapid amortization
- Yes, because the three-month rolling average excess spread is approximately -0.17%
- No, because the most recent month's excess spread was positive at +1.5%
- No, because the average portfolio yield of 19.17% exceeds the average charge-off rate of 12.17%
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