linked bonds offers car loans and leases are about to dominate the sale of asset-backed debt

linked bonds offers car loans and leases are about to dominate the sale of asset-backed debt for a third consecutive year in 2011 after the issuance of all securities fell 31 percent in 2009.

Vehicle debt securities grouped in total probably $ 70 million to $ 75 billion, as much as 23 percent from 2010, as auto sales rebound from a minimum of 27 years, according to Barclays Capital. Sales of bonds linked to auto loans and education, and credit cards may reach $ 115 billion in 2011, Barclays said.

the total emission is reduced to $ 92 million this year from 134 billion U.S. dollars that banks relied more on deposits to fund credit card loans and the Federal Reserve ended its Asset-Backed Term Loan Fund Securities, investors who financed the purchase of asset-backed securities.

"The auto finance companies are still good volumes of new loans," said Brian Wiele, managing director at Barclays in New York, in a telephone interview. "There are banks, and the securitization offers attractive financing."

Automakers are taking advantage of market backed by assets denominated bonds as they anticipate sales of cars and trucks to reach 12.8 million next year. Dearborn, Michigan, Ford Motor Co., the only one of the three Detroit-area manufacturers that did not support the government during the financial crisis was the largest issuer of ABS in 2010, show data from Barclays offering $ 9,800,000,000 .

Bond spreads

More than 66 percent, or $ 61 billion in sales this year asset backed securities were debt related to the car.

Top rated securities linked to performance car loans by 56 basis points, or 0.56 percentage point more than Treasuries, according to data from Bank of America / Merrill Lynch. That compares with relative yields of 193 basis points for bonds backed by student loans and a spread of 68 basis points for credit cards.

Spreads on self-supported debt fell 25 basis points from December 31, 2009 through December 24, the index shows the Bank of America. Spreads on asset-backed securities linked to student loans dropped 3 basis points to 193, while bonds linked to credit card payments, saw his contract relative yields of 24 basis points.

Elsewhere in credit markets, corporate bond sales total of 3180000 million dollars in worldwide this year, down from $ 3,877,000,000,000 in 2009. The extra yield investors demand to own company debt rather than Treasuries ended last week at its lowest in a month. American International Group Inc., the insurer bailed out by the U.S., earned $ 4.3 billion in bank credit lines. Prices of leverage, or speculative grade, loans rose for the third week, while emerging market debt narrowed.

Credit Default Swaps

The Markit CDX North America Investment Grade Index, which investors use to cover losses on corporate debt or to speculate on creditworthiness, an increase of 0.24 basis points at an average price of 85.88 as of 12:20 pm New York, according to Markit Group Ltd. The overall rate increases with deteriorating investor confidence and decreases as improvement.

The credit-default swaps 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.

The extra yield investors demand to own corporate bonds around the world rather than similar-maturity government debt remained unchanged at 166 basis points, or 1.66 percentage points, according to Bank of America Merrill Lynch Global Broad Market Corporate index. Average yields of 4.2 percent.

Corporate bonds have lost 1.01 percent in December, cutting earnings this year to 6.81 percent, including reinvested interest. That compares with 3.42 percent for the company's global Sovereign broader market index and 11.9 percent in the MSCI World Index of shares, including reinvested dividends.

AIG Credit Line

4.3 billion U.S. dollars of AIG's credit, provided by more than 30 banks and managed by JP Morgan Chase & Co., includes two installations of 1.5 billion U.S. dollars, one for three years and the other for 364 days, AIG said today in a regulatory filing. AIG's property-casualty division of Chartis Inc. received $ 1.3 billion, the insurer said. AIG, which is trying to replace government funding with private capital, said on 08 December it agreed to pay 20 billion of Federal Reserve credit line from New York and then turn to stock sale to pay the U.S. Treasury Department. The company rose $ 4.61, or 8.54 percent, to $ 8.97 at 12:27 pm Market New York Stock Exchange.

The S & P / LSTA U.S. Leveraged Loan 100 Index ended 23 December at 92.55 cents, up from 87.68 cents in late 2009. The index, which reached 92.9 cents in April, tracks the 100 largest loans in first lien leveraged dollars.

In emerging markets, the extra yield investors demand to own corporate bonds rather than government debt declined 4 basis points to 236 basis points from December 27, according to JPMorgan Chase & Co. index data. Spreads have ranged from as wide as 346 basis points in May to as narrow as 219 this month.

Fed Fund

Sales of bonds linked to consumer loans and small business plummeted 42 percent in 2008 and shrunk the loans during the credit crunch.

Fed Term Asset-Backed Securities Loan Fund, or TALF helped revive sales temporarily for loans to investors seeking to buy bonds backed by assets. The program ran from July 2009 until March.

While TALF reinforced the market sales of asset-backed debt tied to household debt are falling due mainly to a 85 percent drop in sales of bonds linked to credit card payments, according to a report of 13 Barclays December.

Financial Accounting Standards Board rules that took effect in January requiring banks to keep loans that were packaged and sold to investors in the balance, which means they have to maintain capital against the debt.

"Level of Deposit '

Credit card companies are also enjoying cheaper financing for deposits, said analysts at Barclays in New York led by Joe Astorina.

"Most of the issuers are banks flush with deposits," Wiele said Barclay. "The banks incentives to securitize credit cards are not what they used to be."

The prices of bonds linked to credit cards, can get a temporary boost supply remains muted response to the demand decreases, "said James Grady of Deutsche Asset Management.

"At some point this becomes an area of orphans," said Grady, a managing director in New York in the company, which manages $ 240 billion. "There will be less liquidity, and can not have portfolios of large investors a significant impact '."

Issue of securities tied to student loans dropped to 17.8 billion U.S. dollars in 2010 to $ 20 million last year as the U.S. government eliminated the Federal Family Education Loan Program. Changing market cut private lenders to originate loans guaranteed by the government, reducing the volume of debt for companies in bond package, according to Barclays.

Riskier assets

Sales will be between $ 12 million and $ 15 billion in 2011, analysts at Barclays said in the report earlier this month. The issue of so-called esoteric asset-backed securities, or bonds tied to risky assets or unusual, are set to rise in 2011, according to Barclays Wiele. Barclays and Morgan Stanley sold $ 253,750,000 of bonds tied to the remuneration of billboards operated by Adams Outdoor Advertising LP 3 December.

"The market has recovered to the point where people are willing to look at these transactions and the risks and rewards," he said. "As spreads have narrowed in other assets, investors must look beyond income assets."