Sept. 11 (Bloomberg) -- American Express Co., the largest U.S. credit card company by purchases, sold $1.2 billion in bonds backed by credit card payments at record yields over benchmark rates, according to people familiar with the transactions.

The company sold $568 million of bonds maturing in five years, of which the AAA portion priced to yield 160 basis points more than the one-month London interbank offered rate, said the people, who declined to be identified because terms haven't been announced. In a separate offering of $650 million of bonds maturing in two years, the AAA rated portion priced to yield 110 basis points over Libor.

Investors are shunning credit card securities as consumer spending slows amid growing job losses. Personal spending, the biggest part of the economy, will stall from July to September, a Bloomberg News survey released yesterday showed. The unemployment rate climbed to a five-year high of 6.1 percent in August.

``The consumer is stressed and under severe duress,'' said Pete Hastings, a fixed-income analyst in Memphis, Tennessee, for Morgan Keegan & Co. ``Consumers don't have a lot of discretionary income, and it's painful.''

American Express paid 130 basis points more than Libor in its last sale of five-year AAA asset-backed debt on Aug. 8, according to Bloomberg data. In October 2007, the New York-based company paid 30 basis points more than the benchmark on AAA asset-backed bonds with a similar maturity.

Delinquency Rate

Late payments on credit card bills are rising as consumers struggle to pay their bills. American Express had a credit-card delinquency rate of 3.42 percent as of July, Bloomberg data show. Uncollectible debt rose to 5.3 percent of loans from 2.9 percent a year earlier and will climb as the year progresses, American Express Chief Executive Officer Kenneth Chenault said on July 21.

On Aug. 7, Moody's Investors Service said it may downgrade the lender's credit rating after the company's second-quarter profit fell 37 percent. The rating firm said American Express could suffer further losses on soured credit card loans.

Eight months of job cuts, wages that haven't kept up with inflation, falling property values and restricted access to credit are likely to depress spending into 2009, according to economists polled from Sept. 2 to Sept. 9 in the Bloomberg survey. The bailout of Fannie Mae and Freddie Mac will, at best, only prevent growth from slowing even more, economists said.

After stagnating this quarter, consumer spending will grow at a 0.4 percent pace in the fourth quarter, and expand at a 1 percent rate in the first three months of 2009, the survey showed. Purchases grew 3 percent per quarter on average in the previous five years and have been rising since 1992, the longest string on record.

Payrolls have shrunk by more than 600,000 workers so far this year and the jobless rate shot up 1.1 percentage point from May to August, the biggest four-month jump in almost 27 years, the Labor Department reported last week.

Libor, a borrowing benchmark, is currently set at 2.49 percent. A basis point is 0.01 percentage point.

To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net

Last Updated: September 11, 2008 17:10 EDT