Feeling strong investor demand, Fed offers more AIG subprime MBS

The Federal Reserve Bank of New York is offering more subprime mortgage bonds that the central bank acquired from American International Group (AIG) in 2008. The Fed is offering one list of eight bonds valued at $534.1 million from the Maiden Lane II portfolio, an instrument that holds former AIG assets. The deadline for bids is Thursday. In another offering, bids are due Wednesday on 42 bonds valued at $691.2 million. The new offerings come on the heels of a $1.3 billion subprime mortgage offering by the Fed more than a week ago. In that offering, the Fed also sold bonds tied to subprime securities that were originally under AIG’s control. The first offering saw strong investor demand. It’s a sentiment unlikely to go away. At least not for the second go round. “The first list traded just dandy, and I see no difference on this list,” said Jesse Litvak, MBS trader at Jefferies & Co. “I expect to see good action and street participation [for the next round.]” Analysts this week praised the Fed’s handling of the AIG subprime mortgage bonds and issued a report saying the sale of AIG’s assets indicates there is a strong desire in the marketplace for these securities. Write to Kerri Panchuk.

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