TCW returns to mortgage bonds it sold after declines
TCW Group Inc., the money manager whose staff was shaken up as it fired its chief investment officer in December, has become a buyer of the types of government-backed mortgage securities it rushed to sell earlier this year. In January, the firm’s managers sold inherited positions in bonds guaranteed by Fannie Mae and Freddie Mac that would suffer if the companies stepped up purchases of delinquent debt from securities to cut expenses, said Bryan Whalen, co-head of Los Angeles-based TCW’s mortgage- and asset-backed bond group. After Fannie Mae and Freddie Mac announced buyout plans Feb. 10, TCW’s portfolio shift saved clients money as the market was roiled, Whalen said in an interview last week. The bonds sold included so-called inverse interest-only slices of collateralized mortgage obligations, known as inverse IOs, created from securities with high delinquencies such as those backed by interest-only loans, which it dumped at about $0.12 per notional dollar and could later buy at $0.07, he said. The market for the debt “was too rich, it wasn’t really factoring in the buyouts correctly, now it’s gone completely the other way,” Whalen said. “Some of that has to do with liquidity. There really hasn’t been a ton” as Wall Street dealers and investors retreated from the market after losses and concern that Washington-based Fannie Mae hasn’t fully detailed its plans for buying out bad mortgages, he said.