Here it comes: the spillover from subprime mortgages that many secondary market participants had hoped not to see looks increasingly as if it may finally be coming home to roost. A published report Tuesday morning noted that the credit card ABS market is locking up, as investors pull back from the sector and more borrowers begin to default on their consumer credit debt. The Wall Street Journal, citing data from JP Morgan Securities, said that issuance of credit card ABS fell to $4.4 billion during July, off from $5.26 billion in June and less than half of the $10.1 billion issued in March. A report by JP Morgan structured finance analysts said that deal flow has "slowed considerably" -- and, adding insult to injury in the latest xBS market to falter, those deals that are coming to market are taking longer to do so. Adding to investor fears in the credit card sector was an August 1 report by Citigroup Inc. (C) with the Securities and Exchange Commission that saw the fourth-largest credit card issuer post a $176 million loss in credit card securitization activity during the second quarter. Overall U.S. ABS issuance slowed to a crawl, totaling just $8.6 billion in July according to industry trade publication Asset Backed Alert; so far this year, ABS issuance has totaled just $123.5 billion. Last year at this time, total U.S. ABS issuance was $465.8 billion. Forty-two percent of U.S. ABS issuance this year has been in the form of credit card debt, the largest percentage of ABS (which also includes auto financing, student loans, and the like). July's abysmal ABS issuance total was the worst since December 2007, and the second worst in more than 9 years; and it's led more than a few market participants to wonder what's next in a capital market that has been reeling from the effects of the mortgage crisis for more than a year now. "One has to wonder if the subprime thing wasn't just an underwater event out in the ocean and now the tsunami waves are rolling in, one after another," said one of HW's sources, an MBS/ABS analyst, via email on Tuesday morning. Disclosure: The author held no positions in firms mentioned in this story when it was published; indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.