TALF supply grows to $11.2 billion amid demand

NEW YORK (Reuters) - Issuers ramped up supply on Thursday ahead of the Independence Day holiday and the Federal Reserve's TALF subscription deadline by adding another $1.7 billion of asset-backed securities to the supply calendar.

So far $11.2 billion of offerings are slated to be sold under the Fed's Term Asset-Backed Securities Loan Facility, known as TALF. The program was designed to unclog the consumer loan market and reopen the securitization market.

Issuance is expected to taper off from the $16.5 billion sold during June's subscription round, the largest since the program was launched in March; historically summer months have been lighter.

"Normally, you would expect volume to drop over the summer so that wouldn't be a reflection on the program one way or the other. That would also have been true in 2006," said Reed Auerbach, securitization attorney at Mckee Nelson. "I do know of a couple of July and August deals but it's difficult to tell what is going to happen," he said.

The fifth round of financing under the TALF has been largely led by auto firms. Thursday's addition of a $1.02 billion sale from Ford Credit Auto Owner Trust brings sales in that segment of the ABS market to $7 billion, dealers said.

Ford's deal was immediately fully sold, said one investor, who noted the robust demand generated by the offerings: "Most of the deals this week have been oversubscribed by several times."

The biggest deal under this month's TALF is being revved up by Bank of America Auto Trust. Its $2.5 billion securities offering supported by auto loans was said to be multiple times oversubscribed, dealers and investors said.

Honda's $1.5 billion deal, Chrysler's $1.2 billion sale and AmeriCredit Auto's $725 million sale are among other auto ABS issuers selling TALF-eligible securities.

On Thursday, Harley-Davidson joined the fray of issuers with a $700 million deal backed by motorcycle loans.

Growing appetite for ABS has pulled spreads dramatically tighter on securities this year and sharply reduced the costs of financing for issuers. Record-wide spreads during the height of the credit crisis in late 2008 sent funding costs soaring and nearly shut down the securitization market.

Issuers have sold about $42 billion of supply under the Fed's TALF 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.

(Editing by Leslie Adler)