The revival of markets for bonds backed by auto and credit card debts is expected to be underscored today when the US Federal Reserve reveals details of its latest loans to investors in asset-backed securities. The Fed offers cheap funding every month to investors in such bonds under its term asset-backed securities loan facility (Talf), an emergency measure meant to support the markets through which hundreds of billions of dollars in consumer loans are financed. This month, Fed funding will be available for investors considering buying US$12B in eligible asset-backed securities sold by the likes of American Express, Bank of America, General Electric, Nissan and Ford. Investors and bankers had expected the percentage of asset-backed deals to be financed with Fed loans would be lower than in previous months, reflecting the growing appetite for such securities among investors. According to Deutsche Bank, the Fed financed 82% of Talf eligible securities in August, which included deals financing inventory for car dealers. The full breakdown of this month’s buyers will be revealed after the markets close on today. The Talf’s lifespan was recently extended to March 2010 for some loans and to June 2010 for others, such as those backed by commercial mortgages. Dealers said that until many deals are fully financed without Fed backing, government support provides an important prop for the asset-backed sector. The Fed introduced the US$1,000B Talf this year after it became almost impossible to finance many consumer loans with the sale of asset-backed bonds. Such securities promise investors the cash from pools of consumer loans. Securities backed by auto loans, credit cards and equipment leases are now in better shape, with funding costs down sharply. But problems remain with other asset-backed securities, such as those backed by commercial mortgages. Fed support is expected to focus on these more troubled parts of the asset-backed market.
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