According to the Wall Street Journal, there's a hugely positive indicator that credit markets are really thawing. JP Morgan is completing a wildly successful credit card asset-backed security ("ABS") transaction. They upsized the deal twice: it started at $1 billion on Monday, was quickly increased in size to $1.525 billion, and today was reopened and increased again today to $1.825 billion. That investors are showing strong demand for asset-backed securities again has to be a huge sigh of relief for banks.
The ABS market began to seize up in mid-2007, starting the onset of the credit crunch. The Federal Reserve's Term Asset-Backed Securities Loan Facility ("TALF") was designed to help banks utilize securitization again.
This transaction, along with a few others this month, indicates that the ABS market might not need TALF for much longer. The article mentions that those other non-TALF credit card ABS transactions include another JP Morgan deal earlier in the month of $1.5 billion and a Citigroup deal completed last week of $1.25 billion. These transactions did well because investors are finally becoming more comfortable putting money to work again in the ABS market.
ABS funding has traditionally enabled banks to allow credit to flow to consumers. However, for credit cards consumers, increased credit through the recent success of ABS doesn't seem to be the trend.
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