NEW YORK - A rapidly widening base of investors that includes international banks, securities lenders, and even some sovereign governments has bolstered the asset-backed securities market this year.
So far in 1995, $20.5 billion in asset-backed securities has been issued, double the $10.1 billion in issuance for the same period last year and half as much as the $41.9 billion in nonconvertible debt issued this year by private American corporations, according to Securities Data Co.
In transactions one day last week, Beneficial Corp. sold $1.1 billion in asset-backed securities backed by home equity loans through underwriters led by Morgan Stanley & Co. Also, Chrysler Financial Corp. sold $1.25 billion in auto loan-backed securities through underwriters led by Bear, Stearns & Co. Chrysler Financial is a unit of Chrysler Corp.
The short duration, triple-A credit rating and strong liquidity of asset-backed securities make them attractive to international financial institutions and custodial banks that hold a significant part of their funds in relatively short and liquid instruments, said Daniel Castro, asset-backed strategist at Merrill Lynch & Co.
But the strongest appeal of asset-backed securities for banks and corporations has been the indexation of asset-backed floating-rate notes to the London interbank offered rate, the rate at which banks and other financial institutions lend to each other in the international markets. Most fixed-income securities in the U.S. are priced using Treasury issues as a benchmark.