Sales of bonds backed by retail auto loans are off to one of the fastest starts in recent memory, with more than $12 billion sold in just the first month of the year. Last year, only a few billion had been sold as of this point in the calendar. The fast January puts the auto asset-backed market on a pace to more than double last year's sales, which totaled about $66 billion. The month is the fourth-busiest ever for the auto market, according to Deutsche Bank researchers. Still, structured finance professionals say it is unlikely the torrid pace will continue and believe it is more of a coincidence than anything the auto market has been so busy this year.
"It's been a gangbuster start to the year," said Joseph Astorina, associate director and auto analyst at Barclays Capital. He added auto issues have met strong demand, which has kept spreads tight even amid the increased supply. Barclays expects $73 billion in retail auto loan and lease sales this year.
The fast start has come in all parts of the market, with prime, near-prime and sub-prime deals all selling. Issuers include Ford Motor Credit, DaimlerChrysler and WFS Financial. Ironically, the increased activity comes as auto lenders' credit profiles in the unsecured markets have all suffered from an increasing fear Standard & Poor's will downgrade General Motors to junk. Cash bond spreads and credit default swaps for names across the sector have widened in recent weeks on this fear. But in the structured finance world, spreads have remained steady, even though they have historically widened on headline risk.