Britain's banks are selling the most asset-backed bonds denominated in dollars in at least five years, helping to fill a void left by a $176 billion (Dh646 billion) plunge in outstanding US issues and meeting demand from American investors seeking yields higher than they can get at home.
HSBC Holdings Plc, Lloyds Banking Group Plc and Barclays Plc sold $22 billion of bonds secured by UK home and consumer loans this year, according to JPMorgan Chase & Co. That's 41 per cent of total dollar issuance, the biggest share since at least 2006. Nationwide Building Society sold $3.5 billion of mortgage bonds in dollars and pounds on Saturday after meeting investors in New York and Boston.
Foreign banks are tapping investor demand by selling top-rated bonds with yields over benchmarks that are as much as eight times wider than those on US deals. The amount of outstanding bonds packaging US assets such as credit-card bills, auto leases and student loans fell 9 per cent to $1.85 trillion in the first nine months of this year, according to the Securities Industry & Financial Markets Association, or Sifma.
"The US market can absorb more deals since there is little issuance in the domestic market," David Castillo, a managing director at Further Lane Securities in San Francisco, which trades asset-backed debt, said. "UK mortgage-backed securities are interesting because they tend to be larger transactions of several billion, so the liquidity is good."
The offering by Swindon, England-based Nationwide Building, Britain's largest customer-owned lender, included $2.75 billion of notes due October 2014 with a coupon that is 155 basis points more than the London interbank offered rate, according to a banker familiar with the transaction who declined to be identified because the deal was private.