For the second week in a row, a massive portfolio of subprime non-agency debt hit the market. Last week, the year’s largest portfolio of pre-bust non-agency debt, including vintage subprime, Alt-A fixed-rate, or Alt-A adjustable rate bonds traded.
The $4.6 billion portfolio was the year’s largest, exceeding the January liquidation of the ING US portfolio from the Dutch State Treasury Agency, which checked in at $4.3 billion.
Another massive portfolio hit the market Tuesday. But this week’s portfolio is significantly smaller than last week’s offering though, checking in at $941 million.
According to bond analytics firm Interactive Data, most of the available debt (77%) is subprime.
Per Interactive Data’s breakdown of the bonds, there is $728 million in subprime, $73 million in 2nd lien, $67.4 million in scratch and dent, $39.1 million in Alt-A adjustable-rate, and $18.1 million in Alt-A fixed-rate available among the $941 million package.
The majority of the subprime debt is from the height of the subprime lending bubble, 2006 and 2007, although there are some bonds that date back to 2004.
Included among the list of bonds available for purchase are some of the biggest names from the ghosts of subprime’s past, like Countrywide, Wells Fargo, Structured Asset Investment Loan Trust, Ace Securities, Park Place Securities, and others.
According to a report from Interactive Data, the market initially struggled to completely absorb last week’s $4.6 billion portfolio.
“Since that list hit the marketplace on October 28, the Street had been struggling to place about one-quarter of the risk, or $1.3 billion,” Interactive Data said in a report. “However, as the calendar turned to November, cash appears to have been freed up and dealers were able to move a sizeable amount of paper.”
The last two weeks’ trades are the latest in a trend that has seen an increase in subprime debt trading in the last several months. The subprime market was dormant after the Dutch trade in January. In July, the market finally awoke with BlackRock sale of $3.7 billion in debt on July 15.
The following week, Credit Suisse won two separate bids for a combined $4.4 billion pool of legacy RMBS, also sold by BlackRock.
At the end of July, an undisclosed seller brought $640 million in non-agency subprime debt to the market.
In August, $366.14 million in subprime bonds traded. That list featured some of the most notorious names in subprime lending, including: Ameriquest Mortgage, Countrywide Financial, Bear Stearns, Goldman Sachs, JPMorgan, and Citigroup.
And last month, $477.8 million in non-agency pre-bust bonds traded as part of $727.3 million package.
Plus, earlier this month $885 million in subprime debt exchanged hands as part of a $998 million package. The remaining debt was made up of $73 million in bonds backed Alt-A fixed-rate mortgages and $40 million in Alt-A adjustable-rate mortgages.
