Market Extra: Key component of $1.6 trillion U.S. consumer debt market made history last week

Borrowers shopping for a new car or making a big credit-card purchase are unlikely to notice, but a key part of the U.S. debt market that keeps credit flowing to consumers has gone negative for the first time ever.

The two-year swap spread, a benchmark component of the $1.56 trillion market for bonds that bundle up U.S. auto loans, credit cards and other forms of consumer debt, last week traded below Treasury rates.

“The two-year swap spread, which had never been negative before, sank as low as -3bps and the three-year swap spread reached -5bp on Thursday,” wrote Wells Fargo’s senior consumer asset-backed analyst John McElravey, in a recent note to clients.

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