Demand Drops for Auto ABS via TALF

The July 7 TALF offering saw a 14.4% decline in demand. Demand had been rising steeply since April.

According to data from the Federal Reserve Bank of New York, about $2.83 billion of auto ABS found buyers in the July 7 offering. That was down from more than $3.3 billion at the June 2 sale.

The TALF has been a major source of liquidity for auto finance companies without deposit funds. What follows is the TALF demand on auto securitizations for each of the five TALF offerings:

3/17/09: $1.9 billion
4/7/09: $811 million
5/5/09: $2.2 billion
6/2/09: $3.3 billion
7/7/09: $2.8 billion

Tags: abs, federal-reserve, securitization, talf

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Comment by Larry Yang on July 9, 2009 at 12:51pm: One reason for declining TALF loan demand for auto ABS is that spreads for certain bonds are already tighten to some point a which using TALF loan to buy is not economical due to negative carry. For example, spread for 1-yr BoA auto bond is 95 bps and 75 bps for 1-yr Honda bond. But the interest spread for TALF loan is 100 bps. TALF borrowers have to pay out of pocket to cover the difference.