(Bloomberg) -- Sales of US asset-backed bonds broke through last year’s total and sit in position to overtake the post-Great Financial Crisis record.
On Thursday, Ford priced a $1.7 billion bond backed by auto dealer floorplans, putting sales over 2023 with three months still to go. Companies have sold $283.4 billion of the securities, bonds backed by loans or leases for everything from cars to timeshares, over $1 billion more than last year’s full total, according to data compiled by Bloomberg News.
If the current pace continues, sales will push past $312.6 billion priced in 2021, per Bloomberg-compiled data. Bank of America Corp., which uses a different methodology than Bloomberg in its count, is currently projecting $329 billion in year-end issuance, a post-crisis record.
Much of the growth has come from non-traditional asset classes and the auto subsector, which is projected to jump over $25 billion from last year, according to BofA. Non-traditional deals, like data centers and solar panel securitizations, are estimated to end more than $25 billion ahead of levels last year.
“Capital markets are open, and banks are incentivized to bring new products to market,” said TJ Durkin, head of structured credit and specialty finance at TPG Angelo Gordon. “We believe investors are looking for yield, and there’s appetite for new and emerging asset classes.”
The sales-on-steroids tone, helped in part by more clarity on the direction of Federal Reserve interest rate cuts, has been seen in other parts of the credit market as well. US high-grade bond issuance stands at more than $1.27 trillion, about 30% higher from last year and on track to be the second most ever. Leveraged loan sales have more than tripled this year, while junk-bond volume is also running hot.
Asset-backed deals have not only been getting done, but companies are increasing them from initially marketed sizes. As another sign of health, Theresa O’Neill, BofA Securities’ head of ABS strategy, said spreads had narrowed from the start of the year.
“It’s a very strong tone for the ABS market,” she said.
A potential obstacle for continued sales momentum includes volatility stemming from the US presidential election in November, O’Neill said. But that hasn’t been seen yet — in September, more than $35 billion priced — making it the third-best month of the year.
--With assistance from Kevin Kingsbury.
©2024 Bloomberg L.P.
