There is a steady growth in the issuance of consumer loan-backed bond deals that are not eligible for funding under the Federal Reserve's program to revive this market.

About $9 billion in deals with collateral ranging from student and auto loans to agricultural-equipment loans have come to market since the beginning of the year, according to Informa Global Markets, an information provider for such bonds. This includes a $946 million auto loan issue that is due to be sold on Wednesday.

This is less than nearly $12 billion in asset-backed securities deals sold that were eligible for funding under the central bank's Term Asset-Backed Securities Loan Facility, or TALF, which has had a slow start. That said, it is a sign that investors are warming up to this corner of the credit market which went into hibernation once the credit crunch erupted.

"Investors see safe returns in ABS," said Michael Wade, head of asset securitization origination at Barclays Capital in New York. The bank has been an underwriter for five of the eight non-TALF deals that have emerged since the beginning of this year.

The bulk of the deals sold have been those backed by auto and student loans, including three non-TALF eligible ones from SLM Corp. (SLM), better known as Sallie Mae.

Investors are drawn to these bonds because of their relative stability when contrasted with subprime loan-backed deals and the much-maligned collateralized debt obligations, he said.

Defaults and downgrades on bonds backed by auto and credit-card loans have not been as swift or as dramatic, Wade pointed out.

Even though risk premiums are much wider on the current crop of deals compared with similar bonds sold two years ago, given that yields on Treasurys are at all-time lows, asset-backed securities are seen as an attractive investment, Wade said.

He said an older Honda auto loan-backed deal sold flat to swaps but the one-year portion on a deal sold earlier this year was priced at 175 basis points over swaps.

There is "pent-up demand" for new asset-backed securities "with or without TALF," said Chris DeReza, a researcher and manager at Informa Global.

Issuance of consumer loan-backed deals will pick up in the weeks ahead, regardless of whether they are eligible for the Fed's program, market participants say.

While hedge funds are the main buyers of TALF-eligible deals, the non-TALF deals are being bought by "real money investors" who are not mandated to use leverage, DeReza said. These include insurance companies, pension funds, some banks and money managers.

-By Anusha Shrivastava, Dow Jones Newswires; 201-938-2371; anusha.shrivastava@dowjones.com