Asset-Backed Debt Revival in Europe Led by Ford, BMW (Update1) - Bloomberg.com

Here is evidence that the market for asset-backed debt has finally revived.

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Asset-Backed Debt Revival in Europe Led by Ford, BMW (Update1)

By Esteban Duarte and Jody Shenn

Jan. 14 (Bloomberg) -- Europe's asset-backed bond market, dormant for a year, is coming back to life as Bayerische Motoren Werke AG and Ford Motor Co. sell more than 1 billion euros ($1.45 billion) of debt backed by automobile loans and leases.

BMW, the world's biggest luxury car maker, is selling 742 million euros of bonds backed by German auto leases, said a banker with direct knowledge of the deal. Dearborn, Michigan- based Ford sold 300 million euros of debt tied to car loans on Jan. 8.

The revival in debt backed by consumer and business payments in the auto industry shows improving investor sentiment as Europe emerges from the recession. Yields on company bonds averaged 4.13 percent yesterday in New York, down from 4.37 percent at the start of the year, according to the Bank of America Merrill Lynch Global Broad Market Corporate Index.

"If BMW is successful, it would be a really good indicator for other issuers now monitoring the market," said Markus Ernst, a credit analyst at UniCredit SpA in Munich. Borrowers testing the waters is "definitely a good sign as it underlines that the market is not drying up," he said.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a2imcii4gez8&pos=4

* * * * * J B K * * * * *

San Francisco

James B. Klein
www.paterson.com
paterson-financial-services.blogspot.com

Money Supply Fails to Grow

Here are the latest figures for M1, M2, and MZM.

In each case, the numbers suggest banks aren't making new loans. At this stage in the business cycle, this is predictable.

The question now is when will banks find borrowers with the credentials to justify lending. Paterson believes that process has already begun, and that loans will start to grow in the QII of 2010.

First, the M1 numbers.

This is the raw data, showing growth.



Next, the percentage change since last year. Growth is there, but not enough to keep the economy fueled.



Here are the M2 numbers.

First the total.



Next, percentage change from last year.



Finally the MZM numbers.

Here's the raw data. Again, there's growth, but not enough to fuel the economy.



Next, the percentage change since last year. Banks are not lending.




Summary

Without loans, businesses rely on earnings to fuel future growth. The economy is now at a point when earnings will be insufficient to finance future expansion.

Banks will now begin to find lending opportunities for those firms with credit worthy balance sheets and projects. Lending will begin to increase, and when the year is out, the money supply will be growing again.