Sept. 3 (Bloomberg) -- Bonds backed by credit card debt, car loans and commercial mortgages were the worst performers in the debt markets in August as concern escalated that consumers may fall further behind on their bills.

Asset-backed securities, including debt backed by car loans, credit cards and home mortgages, lost 1.17 percent, according to data from Lehman Brothers Holdings Inc. Commercial mortgage- backed bonds lost 0.82 percent last month.

``There doesn't appear to be a levee high enough to contain the spread of consumer credit risk,'' Jim Vogel, an analyst at FTN Financial Group in Memphis, Tennessee, wrote in a note to clients yesterday.

Structured credit bonds fell amid a slowdown in consumer spending, which accounts for more than two-thirds of the U.S. economy. Delinquency rates on loans packaged into auto asset- backed securities climbed in the first half of the year as the job market weakened and borrowers turned to credit cards, which typically bear higher interest rates than home-equity lines of credit, to finance their purchases, according to a report today from Moody's Investors Service.

``The credit recession migrated from the residential to the commercial mortgage space, and has now moved into the consumer sector,'' Lehman analyst Jack Malvey said today in a telephone interview from New York. ``Financial markets are discounting securities which are perceived to be most affected by consumer behavior.''

Yields Over Benchmarks

Yields relative to benchmark rates on securities backed by credit card debt rose to records during the week ended Aug. 28. Credit card bonds rated AAA and maturing in five years rose 15 basis points from the week earlier to 150 basis points more than the benchmark swap rate, according to JPMorgan Chase & Co. data. Auto bonds rated AAA were trading at a record 160 basis points over benchmark rates and spreads on commercial mortgage-backed securities were at 290 basis points, JPMorgan data show. A basis point is 0.01 percentage point.

More than $358 billion of credit card asset-backed securities were outstanding as of March 31, according to the Securities Industry and Financial Markets Association. Another $196.6 billion in securities were backed by auto loans.

Delinquency rates on loans in auto asset-backed securities rose in each of the first six months of the year, compared with the same periods in 2007, Moody's analysts led by Mack Caldwell in New York wrote in the report. Declining used car values, attributable partly to higher fuel prices, are contributing to more severe losses when borrowers default, they wrote.

Consumer purchases slowed to an increase of 0.2 percent in July, one-third the pace in June, the Commerce Department said Aug. 29. Incomes dropped 0.7 percent, the first decrease since August 2005.

U.S. consumers borrowed more than twice as much as economists forecast in June. Consumer credit rose by $14.3 billion, the most since November, to $2.59 trillion, according to the Federal Reserve.

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

Last Updated: September 3, 2008 15:29 EDT