Market awaits Freddie Mac's USD1.15bn RMBS bid list

Tue Mar 11, 2014 1:11pm EDT

NEW YORK, March 11 (IFR) - Freddie Mac is preparing to sell USD1.15bn of legacy mortgage-bond paper as soon as Thursday, according to market sources, as it looks to meet goals set by regulators to reduce illiquid portfolio assets by 5% a year.

The bid list - the biggest bulk secondary sale of non-agency RMBS paper in a month following the Dutch State Treasury Agency's third and final ING liquidation - includes 46 individual senior securities, some of which have monoline insurance wraps.

The loans are seasoned and generally performing well on the whole, with an average face value in the region of the low 90s in price terms, traders said, and appetite for the debt is expected to be relatively strong amid thin supply.

"Investors were net sellers of USD180m non-agency bonds yesterday as the markets look ahead to USD773m in supply from a hedge fund on Wednesday and the USD1.1bn from Freddie Mac on Thursday," said Scott Buchta, head of fixed income strategy at Brean Capital.

There was less than USD100m of BWICs sold on Monday, for example, while trades were under USD1bn, according to Buchta.

"Look for these lists to trade fairly well and for more supply to pop up both before and after these lists go off."

Fifty-five percent of the securities that Freddie is selling are non-investment grade and backed by subprime, while 44% are adjustable-rate collateral.

The Federal Housing Finance Agency outlined the goal for the GSEs last March as part of their "Conservatorship Scorecard".

Freddie Mac began selling bid lists of bonds last May, while Fannie Mae began in July. Freddie sold close to USD5bn in non-agency legacy securities in 2013, or about 4.16%, out of a retained portfolio of about USD120bn.