at the 39th annual Comic Con Convention in San Diego July 24, 2008.
More than 125,000 people are expected to attend the four-day event
and indulge in a veritable feast of the latest in comic-related books,
movie toys, games and memorabilia. REUTERS/Mike Blake (UNITED STATES)
There are no investors eager to buy credit card security cause credit card bond sales at zero. This situation is driven by lack of confidence of investors to hold credit card backed bonds.
The current weakening job and looming recession are making harder for consumers to make monthly payment. It's the first month since April 1993 that there have been no sales, according to Wachovia Corp. data. Issuers sold $17.1 billion of the debt in October 2007, the data show.
Top-rated credit card-backed securities maturing in three years traded at a gap, or spread, of 475 basis points over the London interbank offered rate, or Libor, during the week ended Oct. 30, JPMorgan Chase & Co. data show, 25 basis points higher than the previous week. The debt was trading at 50 basis points more than Libor in January.
The higher cost to sell the bonds makes it more expensive for banks and credit card companies to fund loans to customers. New York-based American Express Co. paid 160 basis points more than Libor at a Sept. 11 sale of the securities compared with 30 basis points over the benchmark at a similar sale in October 2007, Bloomberg data show.
As consumer spending deteriorated, U.S. credit-card lenders may report record high customer defaults in 2009, Fitch Rating said in a Nov. 3 statement. Sales of credit card asset-backed debt are down 29 percent to $60.3 billion from a year ago, according to JPMorgan.
American Express used the Federal Reserve's commercial facility program for the first time on Oct. 29 as available funding shrank. The lender is slashing 10 percent of its work force as part of a plan to cut costs as cardholders failed to repay loans at almost twice the rate of a year earlier.
American Express has lost 47 percent of its market value this year on concern that higher funding costs and rising defaults will hurt profit. Bank of America Corp., JPMorgan and Citigroup Inc. also rely on the asset-backed market to fund their credit card portfolios, but the banks' large deposit bases give the firms another option to fund originations, according to Deutsche Bank's Grady.
ETFs/Stocks :
JPMorgan Chase (JPM)Related Posts :
Citigroup Inc. (C)
American Express (AXP)
Capital One (COF)
Discover (DFS)
HSBC Holdings Plc (HBC)
Providian (Wash. Mutual) (WAMUQ)
Wells Fargo (WFC)
U.S. Bancorp (USB)
Sources :
- Bloomberg: Credit Card Bond Sales at Zero, First Time Since 1993 (Update1), November 5, 2008 17:12 EST
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