Bonds backed by federally insured student loans and by foreign automobile loans appear attractive even with the deteriorating economy weighing on consumer asset-backed securities, a Barclays Capital analyst said.
Investors should seek safe assets such as government-backed student loans as yield spreads remain at or near record highs, Joseph Astorina, who works in the Barclays PLC unit's New York office, wrote in a report published Monday.
The broader asset-backed securities market will not rally without massive government stimulus, Mr. Astorina wrote.
"We recommend investors stick with top-tier issuers of prime receivables," he wrote.
"We believe senior and subordinate Federal Family Education Loan Program spreads are too wide given the government guarantee and recommend investors buy senior and seasoned subordinate FFELP asset-backed securities."
Yields on bonds backed by automobile loans including from Ford Motor Co., General Motors Corp., and Chrysler LLC, reflect the expectation that one or more of the companies will file for bankruptcy after government loans run out in March, Mr. Astorina wrote.
Investors should buy bonds backed by automobile loans issued by foreign or independent finance companies, he wrote.