US credit card-backed issues soar Lenders are taking advantage of investor confidence in bonds backed by American credit card debt, which has grown thanks to the prudence of the US consumer and the falling number of personal bankruptcies. Capital One is the latest bank selling securities backed by the credit card balances of its customers, returning to the securitisation market for the first time since 2009. It has begun marketing $750m of credit card debt to investors, arranged through JPMorgan. The improving quality of the underlying collateral has sparked a surge in interest in credit card-backed bonds. The number of Americans who declared bankruptcy has fallen for two consecutive years and, according to a new forecast from the credit rating agency Fitch Ratings, will fall again in 2013. Meanwhile, the number of delinquent borrowers is close to record low levels, encouraging investors to bid up for bonds backed by pools of credit card balances. Spreads on credit card asset backed securities (ABS) have narrowed almost to the levels seen at the peak of the securitisation boom in 2007, meaning investors are demanding less of a premium over safer bonds such as US Treasuries. Michael Dean, analyst at Fitch, is forecasting a further 6 or 7 per cent fall in personal bankruptcies in the US this year. Bankruptcy filings totalled 1,157,491 in 2012, a 14.5 per cent decline from 2011, and more than Fitch was forecasting. "It may seem backwards but when economic times are tough, people get more prudent with their finances," said Mr Dean. People pay down debt when they fear they may lose their job in the next year. Credit card delinquency and chargeoff levels reached new lows in 2012, though these may tick back higher in 2013, Fitch suggests, as lenders relax standards that have been very tight since the credit crisis. Joe Astorina, a consumer ABS strategist at Barclays, said the positive performance of the credit card pools reflects a "purge" of less creditworthy borrowers when defaults spiked in the recession, leaving customers with lower balances and a higher chance of meeting their payments. According to a Barclays index, yields on credit card ABS are now less than 0.4 percentage points higher than Treasuries, similar to 2006 levels, thanks to strong investor demand. Fund managers have sought safe assets that yield more than rock-bottom interest rates on government debt. Last year, lenders sold $39.5bn of credit card debt into the US ABS market, in 55 deals, up from $14.9bn in 26 deals in 2011, Dealogic figures show. "It is an attractive funding source for lenders," Mr Astorina said. Credit card issuers who have been using deposits to fund their lending are re-engaging with the securitisation market for diversification of funding.