Bank of America Corp. cut its 2010 forecast for asset-backed debt sales tied to consumer lending, to $120 billion, from $150 billion, as U.S. households borrow less and banks rely more on deposits to fund loans.
The lighter volume is primarily due to a drop in issuance of bonds tied to credit card payments, according to a report issued Thursday by the Charlotte banking company's Merrill Lynch unit. B of A slashed its forecast for such debt to $25.5 billion, from $50 billion. Sales of card-backed bonds stand at $5.6 billion, compared with $24.9 billion during the similar period in 2009, according to data compiled by Bloomberg.
"Volume has been and will likely continue to be affected by tighter underwriting standards and constrained consumer spending," wrote Merrill Lynch analyst Chris Flanagan.
Additionally, banks are relying on deposits to fund new loans, keeping sales of bonds tied to credit card payments low, according to the report.
Top-rated securities backed by credit card payments and maturing in about two years yield 24 basis points more than benchmark swap rates, unchanged from the previous week, according to the report. Similar debt tied to auto loans yields 20 basis points over the benchmark, also unchanged.
The analyst maintained his 2010 forecast of $60 billion for bonds backed by auto debt. Volume has been $33.9 billion to date, according to Bank of America.