Google Plants Billions into Auto ABS

The world’s biggest search engine has been ogling some pretty attractive low-rate securities.

Google dived into auto asset-backed securities with $40 billion, most recently with the purchase of triple-A-rated debt from Honda Motor Co. and Hyundai Corp., according to the Wall Street Journal.

Through Aug. 2, $60.68 billion of bonds tied to car loans had been sold in the U.S., according to Thomson Reuters, up 50% from a year earlier and the highest figure at this point of the year since 2005. Late last month, a unit of Nissan Motor Co. priced $1.4 billion of bonds — increased from a planned $1 billion — at an average rate of 0.48%, a record low, in a deal led by Citigroup. 

So far, asset-backed securities represent less than 1% of Google’s cash.

John Bella, managing director in ABS at Fitch Ratings, told WSJ that net losses on auto asset-backed securities have fallen steadily since the crisis four years ago, and the deals are now backed by prime borrowers.

Only about 1% of the loans originated in 2011 and packaged into auto asset-backed securities are expected by Fitch to default, compared with 2.6% of the loans in auto deals originated in 2007, WSJ reported.