The non-agency residential mortgage-backed securities market is estimated to revive in the second half of 2014, but the first signs of strengthening are starting to show.

“After weathering a bit of a supply drought, the US Non Agency RMBS marketplace is gearing up to bid on approximately $1.15 billion worth of legacy paper on Thursday March 13,” a note from Interactive Data said.  

The list is comprised of 46 individual securities and is the first meaningful block of bonds to hit Wall Street since the third and final ING/DSTA liquidation was sold on Feb. 4, the report said.

The previous ING deal consisted of $2.1 billion in private mortgage bonds.

While the seller of Thursday’s BWIC is so far unreported, it is possible that Fannie Mae or Freddie Mac is behind it since they are working toward the Federal Housing Finance Agency’s goal of a 5% annual reduction in illiquid portfolio assets.  Interactive Data added that the majority of the line items out for bid are the entire outstanding tranche size, implying a potential GSE carve-out. 

The list is comprised mostly of non-investment grade securities backed by Subprime (55%) and Adjustable-Rate (43%) collateral, the loans are seasoned and generally performing well on the whole.

“All are Senior tranches and a few have insurance wrappers from a monoline. On a weighted average basis (by current face), the evaluated price of the aggregate list is approximately $93,” the note stated. “The fixed-rate component has a simple average evaluated price of $94.5, while the ARM and Subprime groupings are at $95.3 and $92.1 respectively.”

This comes on the heels of a report from Amherst Securities Group on Monday saying that the non-agency market has significantly dwindled and fell to $782.4 billion in unpaid balance, and 3.5 million in loans outstanding.

Once the second half of the year rolls around, Redwood Trust (RWT) will like start issuing again as the market starts to pick up, sources said.