Bankers were relieved Thursday after investors snapped up the first issue of credit-card-backed securities offered since Congress flirted with capping the interest rate on card loans.

The issuer, Household Bank, a subsidiary of Household International, raised nearly $1 billion in back-to-back deals Wednesday and Thursday. Wednesday's issue was oversubscribed, and Thursday's was going well, traders said late in the day.

A Reaffirmation

"If Household can make an offering, it reaffirms that the market is still there," said Vernon Wright, executive vice president of MBNA Corp. A weak market would have threatened banks that increasingly must sell credit card receivables to maintain adequate capital-to-asset ratios.

Household's offering came five weeks after Sen. Alfonse M. D'Amato, R-N.Y., proposed a cap on credit card interest rates. The proposal temporarily drove investors in credit-card-backed securities into hiding, investment bankers have said. While no bank withdrew an offering, traders said, some postponed plans to come to market.

But now, it looks as though the market has calmed down. "The nervousness about the difficulties for the credit-card-backed securities markets because of the political jawboning have been pretty much forgotten," said a trader.

Investment bankers said, however, that Household paid an additional 15 basis points over recent spreads to attract investors to the three-year bonds. Five basis points reflected fears about a card cap, the investment bankers said. Issuing late in the year, when investors are not so hungry for new securities, accounted for the other 10 basis points.

The coupon rates on the two issues were 6.0% and 6.7%. The lower rate produced a spread of about 86 basis points over comparable Treasury securities - about the same margin that issuers had to pay in September for five-year credit-card-backed securities, which are riskier because of the longer maturity.

Household benefited this time from pent-up demand, traders said. Indeed, when Household issued similar bonds in September, long before the furor over card rates, the deal was a hard sell.

Although the specter has receded, it hasn't disappeared.

"The cap on credit cards rates will be a concern in the future," said Bradford langs, an analyst at Kemper Securities in Chicago. "The spreads are a little wider than they were before, but the market is settling down."

Other issuers of credit-card-backed securities can expect to match the slightly higher spread Household had to pay, at least in the near future, said investment bankers. But that narrow boost in margins is not expected to keep any major issuer of such securities out of the market.

Waiting till 1992

Citibank and MBNA, two major issuers, plan to continue to issue securitized assets, although they will wait until the new year. By then, the "scare premium" may have evaporated.

"We hope that, over a period of time, investors would see the value in the securities and the spreads would tighten," said William ahearn, a spokesman for Citibank, the Citicorp subsidiary.

Traders had expected few financial companies to issue credit-card-backed securities in the fourth quarter, anyway. Most banks and financial companies came to market in the first nine months of the year, trying to avoid last year's late deluge of issues and the higher spreads they then had to pay.

The proposed rate cap threw a scare into investors. If an interest rate ceiling had been set at 14%, as Sen. D'Amato's bill would have done, the yield on the underlying portfolios of receivables would have dropped.

Crimping Investors' Income

In consequence, banks would have been forced under terms of the securities to repay bondholders early.

Investors would not have lost principle because the securities are typically protected by letters of credit. But investors could have lost, say, two years of 9% interest payments. And they could have been forced to find another investment, which might pay lower rates.

More recent credit-card-backed securities pay about 7%, for example.

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