Mortgage-Backed Securities See Investor Demand, Rise 1/8
May 17, 2011
Traders said purchases helped prevent mortgage-backeds from slipping as much as the Treasury market when prices fell in the morning. However, the support did not continue sufficiently to allow mortgage-backeds to fully participate in the government market's recovery; they ended up 1/8. In 30-year pass-throughs, traders said the main demand was for 7% and 7 1/2% coupons, with interest returning to 8% securities since they were priced below par for much of the day. However, discounts were also supported by purchasing, and premiums such as 9% lost almost no value at all before rebounding. A pass-through is a security made up of a pool of debt instruments, with the income from the debt passed through an intermediary -- usually a government agency or investment bank -- to the investors. Meanwhile, the $1.5 billion swap from seasoned production into new origination continued. Tuesday, the account sold $350 million of dwarf 6% securities. Bank of America is said to be executing the transaction. The bank has repeatedly declined to comment. Last week, $90 million of 5 1/2% dwarfs and $140 million of 6% five-year balloons were sold. Wednesday, $250 million of dwarfs with coupons from 6 1/2% to 8% are to be put on the market. The $1.5 billion is approximately evenly split between 15-year and 30-year loans, originated from 1993 to 2011. Traders expect the 5 1/2% securities and balloon securities sold from the big bid list to be used as a base for a collateralized mortgage obligation offering. Wednesday, $250 million of 15-year Fannie Maes with coupons from 6.5% to 8% will be on the market.
VastPress 2011 Vastopolis
