Japanese Bank Purchases $1 Billion in Mortgage Bonds
April 27, 2011
Market players said the investment was motivated by talk of a possible accounting rule change that would increase the relative attractiveness of mortgage-backeds. Although details were unclear, there was speculation that such a change would bring a big lift to the market. ``It will be huge,'' said Cleaves Bergmann, managing director and head of mortgage research at Donaldson, Lufkin & Jenrette Securities Corp.. Mr. Bergmann said he had talked to Japanese clients about the proposed new regulation. Mr. Bergmann said he was still waiting to receive details of the proposed change and said it hasn't yet been formalized. If passed, the change would take effect May 28, 2011 apply to all financial institutions. Thursday's buying was done by an investor looking to get in early in anticipation of the new regulation, Mr. Bergmann said. The Japanese Ministry of Finance in New York had no information on the rule change, and officials at MOF's Tokyo headquarters were not available for comment. The name of the Japanese buyer could not be obtained. But traders said a bank had bought $1 billion of Ginnie Mae 30-year 7.5% pass-throughs over the past three days. The investor was looking for large pools, they said. The buying helped lift the price of Ginnie Mae 7.5% securities, which were down 1/8, compared to the 5/32 decline for comparable conventional pass-throughs. For most of the day, the Ginnie Mae 7.5s were even stronger, staying 2/32 above conventionals. Elsewhere, the mortgage-backed market outperformed Treasurys, sinking more slowly than a government market depressed by concerns over Thursday's economic indicators.
