The automobile and the truck is gaining the confidence of bond investors

The automobile and the truck is gaining the confidence of bond investors as sales soar and General Motors prepares an initial public offering of shares this week.

Yields on securities tied to car sales have dropped to 80 basis points more than the reference exchange rate of 95 basis points three months ago, according to Barclays Capital. Spreads on bonds linked to consumer debt such as credit cards and student loans, remained unchanged at 73 basis points.

The increased appetite for the debt means that automakers and their finance units can more easily raise money to make loans, helping sales of cars and trucks and potentially boost its solvency. Global sales of light vehicles, can increase to 71.1 million this year, according to JD Power & Associates in Troy, Michigan, surpassing the record 70.3 million units sold in 2007.

"The automotive sector is the only area that has a strong new issue market," said Joseph Astorina, a bond analyst at Barclays Capital in New York. "It was very strong appetite for new agreements and has helped the ramp in demand and adjust the differential."

Sales associated with auto loans account for 54 percent of the 108 billion in securities backed by family and business loans have been sold this year, according to data compiled by us ,Last year, 36 percent of the 184 billion U.S. dollars of the securities sold were tied to the debt at issue.

Procter & Gamble

GM, rescued last year by the U.S., plans an initial public offering after reporting 2.16 billion U.S. dollars in net income for the third quarter. Ford Motor Co. 's nine-month revenues of 6.37 billion U.S. dollars more than double its 2.72 billion U.S. dollars in profits for the past year.

Elsewhere in credit markets, yields on corporate bonds worldwide rose for the second straight week. Spreads on debt from U.S. company Europe and Asia widened 2 basis points, or 0.02 percentage point last week to 167 basis points, and are up 3 basis points this month, according to Bank of America Merrill Lynch Global Broad Market Corporate Index.

Yields increased by an average of 3.58 percent from 3.42 percent on 5 November. Yields were 4.25 percent higher than a year ago.

Procter & Gamble Co., the world's biggest consumer products, can sell tickets for five years in a reference offer, according to a person familiar with the operation. The senior unsecured debt can be sold as early as today, said the person, who declined to be identified as terms are not set. reference sales are typically at least $ 500 million.

Default Swaps Fall

Barclays Capital is marketing the $ 500 million of bonds backed by credit card payments, according to a person familiar with the operation. The class titles, due in 1.98 years, can give 60 points higher than the interbank rate of one month's supply of London, said the person, who requested anonymity because the terms are not public.

The cost of protecting corporate bonds from default in the U.S. fell, Markit CDX North America Investment Grade Index, which investors use to cover losses on corporate debt or to speculate on creditworthiness, the decline of 2.1 basis points at an average price of 91.5 basis points from of 11:46 am in New York, according to index administrator Markit Group Ltd.

The overall index falls as improving investor confidence and increases as it deteriorates. Swaps credit-default pay the buyer face value if a borrower defaults on its obligations, less the value of the defaulted debt. A basis point equals $ 1,000 annually on a contract protecting $ 10 million of debt.

Esparza stricter

automobile manufacturers and finance are based on asset-backed securities to raise funds to make loans. The sale of debt is a cheap way to diversify sources of funding, according to Barclays Capital Astorina.

"The all-in cost is very attractive," he said. "It's a cheaper source of financing of unsecured debt or bank loans."

The spreads of the values of auto asset-backed bond rated A to AAA and maturing in three years was reduced by 145 basis points to 100 basis points in the last 52 weeks, according to a report by Citigroup Inc., dated 12 November. Similarly nominal value of credit cards five years have been hardened by 90 basis points.

AmeriCredit Financial Services, a lender to car buyers with bad credit property located in Detroit, GM, and Japan's Nissan Motor Co., sold $ 1,450,000,000 of bonds backed by assets, on 10 November.

Fort Worth, Texas-based AmeriCredit paid 55 basis points more than the reference exchange rate of 90.3 million U.S. dollars of securities with a maturity class at 2.12 years. In his previous sale of similar debt in September, the company paid 45 basis points over swaps, according to Our data.

Most prime-selling Nissan, a slice 223 million U.S. dollars maturing in two years, yields of 47 basis points more than benchmark swap rate.

Sales in Europe

In Europe, sales of bonds backed by car loans increased to 6 million euros (8.23 billion) this year, 1.2 million for full year 2009, according to JPMorgan. Investors demand an average of 80 basis points more than the euro interbank offered rate, or Euribor, maintaining high values of two years backed by European car loans, compared with an extension 135 basis points late last year, according to JPMorgan show.

"Auto loan ABS has attracted considerable investor interest due to their nature short time, liquidity and guarantee good performance of German," said Flavio Rusconi, a London-based analyst at JPMorgan. "This helped to tighten spreads over the past year."

GM would price its IPO above the expected range and to exercise an option to sell more shares amid signs of strong demand, according to two people familiar with the operation.

Ford Turnaround

The six receiving GM executives have received from investors in a promotional tour to announce the IPO has been strong enough to sell the shares at the top of the range offer of $ 26 to $ 29 or more $ 30, said the people, who declined to be identified because the information is private.

Noreen Pratscher, a GM spokesman, declined comment.

Ford CEO Alan Mulally, the automaker turned in Dearborn, Michigan, around after losses of $ 30 million in 2006 to 2008, allowing the company to pay 10.8 billion U.S. dollars in obligations this year and reduce the debt of its automatic printing device 22.8 billion U.S. dollars.

Global sales of light vehicles, increase by 6 percent to 73.8 million next year, of Lexington, based in Massachusetts, said IHS Automotive in September. The forecast is 1.95 million additional deliveries in China and South Asia and an increase of $ 1.5 million in sales in North America.

Declining Market

Offers related to auto loans, leases and debt finance cars have gained a greater share of a declining market for asset-backed securities, the data show Citigroup. While the car market has fallen 0.8 percent this year, issuance of securities backed by credit card debt of $ 5.99 billion represents a decline of 85 percent over the previous year and that households save more.

Default rates on auto loans packaged into bonds are running "well below" the peak levels of 2007 and 2008, according to a report by November 04, Wells Fargo Securities.

"The automotive sector has passed its peak in the losses from the credit crisis and recession," said analysts led by John McElravey in Charlotte, North Carolina. Used vehicle demand is also helping to shore up prices, helping to minimize losses on defaulted loans, they said.