Fed Reserve sells less than half Maiden Lane II offering

The Federal Reserve Bank of New York sold just $1.9 billion in offered mortgage-backed securities from its Maiden Lane II portfolio. Initially, $3.8 billion was up for bid. In the end 36 out of 73 bonds priced. Maiden Lane II is the MBS platform for assets taken in the American International Group bailout. The Federal Reserve blocked AIG’s attempt to buy back the $31 billion portfolio of subprime assets in favor of open market sales. A source tells HousingWire that the original, relative success of Maiden Lane II offerings is down to the collateral in the bonds. Initially, the Fed put up less risky assets and is now moving to larger subprime holdings, though this could not be immediately confirmed. The sheer volume of bonds grew substantially with this week’s sale, however. A typical Maiden Lane II sale is between $500 million to $1.3 billion. Deutsche Bank analysts put the Fed Reserve’s goal for winding down its total MBS portfolio by $9 billion in June. Some MBS traders claim that the Maiden Lane sales are applying pressure to the secondary market. Write to Jacob Gaffney. Follow him on Twitter @JacobGaffney.