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Subprime Auto ABS Grows as Lenders Chase Margins: Credit Markets

Sales of bonds tied to payments on subprime car loans are accelerating at the fastest pace in five years as investors seek high yields amid speculation the Federal Reserve will keep interest rates at record lows until mid-2015.

Led by Santander Consumer USA, issuance of $10 billion this year in asset-backed debt linked to vehicle loans to borrowers with spotty credit records compares with $8.2 billion in the same period of 2011, according to Barclays Plc. Top-ranked securities backed by the loans yield between 15 and 25 basis points more than benchmark swap rates, versus 5 to 8 basis points for similar debt of prime borrowers, Deutsche Bank AG data show.