Auto loans now makeup about two thirds of the asset backed lending market as investors flee credit cards and student loans

What does it take to get a loan in this town?  A common theme across the credit lending spectrum.  During the crisis, the one bright area in the credit markets is the auto financing.  At least that is the only place that is still doing deals. 

But perhaps, it is not so much as the strength of the auto financing sector as it is the weakness of the rest of the market.  During a downturn, student loans are the first to get put off.  The second would be unsecured credit cards. 

Auto loans, on the other hand, are seen as an ongoing neccessity.  It would guess that they would be even more secure than mortgage financing.  Foreclosure can often wipeout the mortgage debt.  With auto loans, the borrower is still on the hook for the shortfall.  Via Bloomberg:

More than 66 percent, or $61 billion, of this year’s asset- backed securities sales were connected to automobile debt.

Top rated securities linked to auto loans yield 56 basis points, or 0.56 percentage point, more than Treasuries, according to Bank of America/Merrill Lynch data. 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 for auto-backed debt narrowed 25 basis points from Dec. 31, 2009 through Dec. 24, the Bank of America index shows. Spreads for asset-backed securities linked to student loans shrank 3 basis points to 193, while bonds tied to credit card payments saw their relative yields contract 24 basis points.


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