NEW YORK — Investors applied for $11.45 billion in loans from the Federal Reserve to buy bonds backed by consumer debt in the fourth round of such funding.
The Fed gives loans to investors through its Term Asset-Backed Securities Loan Facility, or Talf, at attractive rates as part of its effort to revitalize the asset-backed securities market.
In May, investors applied for $10.6 billion in loans. That was a big jump from March, when the program was launched and investors applied for $4.7 billion in loans. In April, that figure had dropped to $1.7 billion.
About $16 billion of securities backed by consumer loans sold Tuesday ahead of the application deadline.
"Investors are very interested in these bonds," said Jim Harrington, senior portfolio manager at Ryan Labs Asset Management in New York. "Many of the deals were upsized." Chesapeake Funding LLC's bond was doubled in size, to $2 billion, as was Ford Motor Co.'s FCALT 2009-B bond, which rose from $1 billion to $2 billion.
Ford and Citigroup Inc. sold two bonds each that are eligible for Talf. Citi's $4 billion credit-card-loan-backed deal, the Citi Omni 2009-A deal, was the largest in this round.
Other issuers include auto makers BMW AG, with a $2 billion deal, Nissan Motor Co., with a $1 billion bond, John Deere Owner Trust and PFS Financing Corp.
"Momentum is growing stronger," said Michael Wade, head of asset securitization origination at Barclays Capital in New York. "There are more issuers, more asset classes and more investors."
While market participants point out it is too early to say if issuance will be even larger in July, they say they fully expect more investors to participate in the program and the number of deals offered to increase.
"The program is definitely working," Wade said.
The Fed will say how much it dispersed in loans later this month. The next loan application deadline will be the first Tuesday in July.
