Demand strong for $9.5 billion TALF sales

NEW YORK (Reuters) - U.S. asset-backed securities spreads were unchanged in light volume on Wednesday with investors focusing on the growing list of oversubscribed sales under July's TALF subscription deadline.

"ABS trade has been slow today although we did see some recent tranches from some TALF eligible securities trade at a spread premium," said one ABS trader.

About $9.5 billion of ABS deals were gearing up to come to market under the Federal Reserve's Term Asset-Backed Securities Loan Facility, created to unclog the consumer loan market and reopen the securitization market.

"Most deals have been oversubscribed by several times. Discover just launched its deal at a larger size and tightened its spread," said one bond investor.

Discover is selling $1.5 billion of 2.92-year AAA-rated TALF eligible credit card securities at a tighter spread of 130 basis points over one-month Libor. Initially, the deal was slated to come at a $1 billion size and at a wider spread of 140 basis points, market sources said.

In the student loan segment, SLM Corp is offering $1.1 billion of AAA-rated 3.92-year securities at a spread of 150 to 175 basis points and is meeting with exceptional demand as well, dealers and investors said.

The bulk of new supply under July's TALF program is coming by way of the auto segment where over $6 billion in combined sales are being sold by four issuers, market sources said.

In the largest offering of the bunch, Bank of America Auto Trust plans to issue $2.5 billion of securities. The deal remains multiple times oversubscribed, dealers and investors said.

Honda plans to offer $1.5 billion of AAA-rated auto ABS, while Chrysler's is issuing $1.2 billion of AAA-rated one-year and two-year notes, market sources said.

A smaller $725 million AAA-rated offering from AmeriCredit Auto is also drawing huge demand from investors and was said to be as much as 17 to 19 times oversubscribed, dealers said.

Issuers have sold about $42 billion of supply under the Fed's TALF program since its launch in March. That has bolstered supply in the second quarter to $49.7 billion, from a paltry $13 billion in the first quarter, according to Thomson Reuters.