Credit Card Bond Spreads Reach Record Over Benchmarks (Sept 2 – Bloomberg)
Sept. 2 (Bloomberg) — Yields relative to
benchmark rates on securities backed by credit card debt rose to
records amid concern that falling household income will curtail
spending and make it harder for consumers to pay their bills.
Spreads on credit card asset-backed securities of different ratings and
maturities rose by 10 basis points to 50 basis points during the week
ended Aug. 28, according to JPMorgan Chase & Co. Credit card bonds
rated AAA and maturing in five years rose 15 basis points from the week
earlier to 150 basis points more than the benchmark swap rate, analysts
led by Christopher Flanagan in New York wrote in an Aug. 29 report.
Investors are retreating from securities backed by credit card loans
following a slowdown in consumer spending, which accounts for more than
two-thirds of the U.S. economy. Delinquencies are rising as Americans
rely more on the debt to cover expenses because falling home values are
causing banks to restrict access to home-equity lines of credit.
Here is yet
another indication that the economy is neither expanding nor is in
particularly good shape. Virtually every class of debt I have looked at
reveals signs of stress. Yet the airwaves are full of the words “bottoming,” “bottom,” and “recovery,” even as housing, credit, and consumer markets remain weak, if not deteriorating.
Don’t fall for it.
by former_user