May 15, 2009
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News: JPMorgan Sells $1 Billion in CC Bonds
JPMorgan Chase & Co. announced the sale of $1 billion of bonds backed by future credit card payments. The bonds were not sold through the Federal Reserve’s Term Asset Backed Securities Lending Facility (TALF), but rather they were sold through public auction. The TALF program developed by the Fed to jumpstart the economy was announced last year; however, was not launched until March 2009. The program is slated to buy up $1 trillion in financial assets including credit card debt, auto debt, commercial mortgages, and personal mortgages. The main purpose is to free up the banks money to make more funds available for lending to consumers. Earlier this month, JPMorgan sold $5 billion in bonds backed by credit card debt through the TALF program.
According to the Wall Street Journal the sold securities were initially set at $700 million, but strong demand for the top-rated securities drove the figure up. The securities yield 115 basis points more than the benchmark swap rate. The Journal further stated that the credit card bonds were not eligible for sale under the Federal Reserve’s TALF program. It is also noted that this is the first sale of the year offered at public auction and without the assistance of the Fed. According to Ross Heller, Managing Director of New Oak Capital LLC, the move is a sign that investors are beginning to warm up to bonds backed by credit card debt and loans as the program grows. Heller further stated that it’s too early to say if the market is springing back, but it looks as though it is moving in that direction.
JPMorgan Chase is the second largest U.S. Bank and a leader in the global financial arena. Their assets total over $2.1 trillion and they operate in more than 60 countries. JPMorgan provides investment banking, financial services and credit cards for consumers and small business as well as commercial banking, financial transaction processing, asset management, and private equity. Their corporate offices are located in New York with branches throughout the country.