Ally Financial Inc. (ALLY:US) and Nissan Motor Co. led companies selling about $13.3 billion in bonds tied to U.S. household borrowing in May, compared with a 12-month average of $14.4 billion, as auto sales climb.
Offerings tied to vehicle purchases accounted for $5.2 billion in asset-backed issuance, according to data compiled by Bloomberg. Ally sold $1.3 billion in bonds linked to auto loans last week. Nissan sold $1.25 billion of similar securities on May 12, the data show.
Companies are issuing asset-backed securities linked to car loans and leases with automobile sales headed for the best showing since 2007. Purchases at Ford Motor Co. (F:US) increased 13 percent in May, compared with the same period in 2011, the Dearborn, Michigan-based company said in a statement today.
Ford, in a bid to diversify its funding (F:US) sources, will convert $2.5 billion in asset-backed securities to senior unsecured debt next week after Moody’s Investors Service and Fitch Ratings raised the company’s debt ranking to investment grade.
U.S. car and light-truck sales this year may reach 14.3 million, according to estimates from 14 analysts compiled by Bloomberg. That would be the best full year since 16.1 million in 2007.
Top-ranked debt backed by auto loans is yielding 61 basis points more than Treasuries, up from 59 basis points on April 30, according to a Bank of America Merrill Lynch index. The securities returned 0.06 percent in May. That compares with 0.33 percent for bonds tied to credit-card payments and 0.58 percent for investment-grade corporate bonds, index data show.
Ally paid 17 basis points more than the benchmark swap rate on a top-ranked portion of its sale maturing in 2.4 years, Bloomberg data show. Nissan paid 47 basis points more than the one-month London interbank offered rate, or Libor, on AAA debt maturing in three years.
Libor, the rate at which banks say they can borrow in dollars from each other, acts as a benchmark for about $360 trillion of financial instruments worldwide.
Spreads on consumer asset-backed securities have been stable even as the European debt crisis roils markets, Wells Fargo & Co. analysts said in a report yesterday.
“Our expectation is for various segments of consumer ABS to outperform in the event of increased market turmoil related to the situation in Europe or other macroeconomic events,” wrote the analysts led by John McElravey, who is based in Charlotte, North Carolina.
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