Citigroup (NYSE: C) and Bank of America (NYSE: BAC) sold the most out of a group of banks that sold $15 billion in asset-backed debt, the highest total since June, before the September 3rd deadline for the 7th round of the Federal Reserve’s Term Asset-Backed Securities Loan Facility Program (TALF).
On November, 25th of 2008 the Federal Reserve announced the Term Asset-Backed Securities Loan Facility (TALF) program in hopes of jumpstarting private lending in the United States. Under the program, the Federal Reserve Bank of New York will issue up to $1 trillion on a non-recourse basis to holders of certain AAA-rated asset backed securities. The program will support asset backed securities (ABS) for bonds that are collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration (SBA).
Citigroup sold a total of $2.85 billion in bonds backed by credit-card payments. The largest asset-class was a $1.6 billion 4.93 year bond that price to yield 2.75% more than the one-month London interbank offered rate.
Bank of America sold a total of $3 billion backed by auto loans. The largest portion of their sales came from the transaction of a $1.1 billion top-ranked 1.99-year debt that priced to yield .85% above fixed-rate benchmarks. In a recent Bloomberg article, Richard D’Albert of Seer Capital management stated, “This is a big month for auto paper. This month the deals emphasize collateral that is more widely understood by the market such as auto loans and credit cards.”
Other banks that sold bonds for tomorrow’s deadline include the financial arm of General Electric, Hyundai Motors and Ford Motors. American Express, Discover Financial Services and Ally Bank also sold bonds that qualified for the September deadline.
