$890 million in subprime vintage debt hits secondary market

Part of $1.01 billion package

Nearly $900 million in subprime non-agency mortgage bonds from big names like Countrywide, Bear Stearns, and Washington Mutual were part of a $1.01 billion package of vintage debt that hit the secondary market Thursday.

According to bond analytics firm Interactive Data, the package is the second massive offering featuring subprime debt to come to market in 2015.

“Since year-end, secondary volume has been building gradually, with customer trading flows rising from a daily average of $414 million in the first five trading days of January, to $951 million over the last five sessions,” Interactive Data said in a report, adding that customers have sold nearly $1 billion of non-agency mortgage debt so far this year.

The majority of the subprime debt in this offering is from the height of the subprime lending bubble, 2006 and 2007, although there was one line item from Countrywide from 2004, which carried an original face value of $964.7 million and carries a current face value of $45.5 million, according to Interactive Data’s pricing information.

And according to Interactive Data’s report, the bonds were mostly well-received by the market. Only three line items in the bond package did not trade, and two of those were “zero factor shelf bonds” from Bear Stearns Mortgage Funding Trust.

“The rest of the list covered within +/-$1.4pts of the average Px Talk from dealers, implying a fairly orderly liquidation,” Interactive Data said.

Also included in the bond package were bonds from Long Beach Mortgage Loan Trust, Securitized Asset Backed Receivables LLC Trust, Morgan Stanley, and Lehman XS Trust.

The increased frequency of the sale of vintage debt in the first few weeks of the year is in stark contrast to how 2014 began.

Last year, the market effectively froze after a January liquidation of the ING US portfolio from the Dutch State Treasury Agency, which checked in at $4.3 billion.

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.

And 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 SachsJPMorgan, and Citigroup.

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