Repackaged auto loans seem like an unlikely place for mauled credit investors to hide, but they are outperforming and issuance is at a multi-year high, Bloomberg News reported. Corporations have sold more than $58 billion of asset-backed securities supported by auto loans this year, about 20% more than at this point in 2021. Santander Consumer and First Help Financial both offered deals this week, while Carvana Co. — the online used car seller whose shares and junk bonds plunged — plans to sell $605 million of the debt next week. “Auto ABS is one of the safe havens in structured credit now,” said Tracy Chen, portfolio manager at Brandywine Global Investment. Asset-backed securities can get clobbered during an economic downturn, as consumers get laid off and default on their debt. During the financial crisis, the securities got hit particularly hard as the housing bubble popped and bonds tied to debt including second mortgages and home equity loans headed south. But auto loan debt is ultimately backed by cars, including loans made to subprime borrowers. Prices on both new and used vehicles are up with prices on both new and used vehicles up 14% over the last year thanks in part to shortages of chips, according to U.S. consumer price index data and the Manheim index. Used car prices have been falling in recent months, but new vehicle prices are still rising.
