US mortgage bond market liquidity measure approved

By Al Yoon

NEW YORK, Jan 9 (Reuters) - An industry group on Friday said it approved a proposal aimed at boosting trade and prices in parts of the $4.5 trillion market for guaranteed mortgage-backed securities.

The Securities Industry and Financial Markets Association's plan lets dealers re-package a type of structured mortgage bond into a security eligible for a more liquid market, according to a letter to SIFMA members obtained by Reuters.

Dealers will be able to re-package collateralized mortgage obligations, or CMOs, with attributes similar to plain-vanilla mortgage bonds to boost their values, and solve a problem for holders who have found the securities tough to sell as the global financial crisis turned investors away from risk.

(Editing by Chizu Nomiyama)