Investors are looking to sell consumer loan-backed bonds valued at $940 million that they had bought a little over a year ago using low-cost loans from the Federal Reserve.

The nine bonds, valued at between $11 million and $210 million, are triple-A-rated securities and are backed by auto and credit card loans, according to Jim Harrington, an asset-backed securities investor who had purchased some of these bonds when he worked for Ryan Labs Asset Management in New York.

In an effort to support the consumer loan-backed market, the Fed had launched the Term Asset-Backed Securities Loan Facility, or TALF, in March last year. Through the program, it offered investors loans at attractive rates. The loans were nonrecourse, meaning that if anything went awry, the investor could walk away from the loan with minimal losses. The move was designed so investors could purchase newly minted bonds backed by consumer debt at a time when investors were wary of debt whose underlying collateral they were unsure about.

TALF was deemed successful in energizing the market for these bonds as about $140 billion in asset-backed securities were sold last year. By November, more asset-backed bonds were sold outside the program than those under TALF.

"Those bonds are trading above par so investors have made their money and want to sell so they can reallocate their cash," Harrington said.

Either they could buy new asset-backed bonds or they could buy corporate debt, he said, noting there is ample supply of both even as interest rates remain low and investors reach for higher yields.

About $11 billion in new asset-backed bonds have sold in the past two weeks, according to data from Citigroup. That brings the total sold so far this year to $75.52 billion.

On Wednesday, a bid list of TALF bonds valued at $400 million was circulating for sale, according to a person familiar with the matter. The largest part of the list was a $115 million bond from SLM Corp. (SLM), better known as Sallie Mae.

Among the bonds on sale Thursday are those issued by Ford Motor Co. (F), AmeriCredit Corp. (ACF) and Citigroup Inc. (C), Harrington said, adding buyers include insurance companies and investors who want to hold high-quality, short-term ABS.

Hedge funds and other levered players can get better terms from dealers in the current environment so they are selling these older assets "to buy new assets with better financing terms from the dealers," said Paul Norris, head of structured products at Dwight Asset Management in Burlington, Vt.

-By Anusha Shrivastava, Dow Jones Newswires; 212-416-2227; anusha.shrivastava@dowjones.com
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