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NEW YORK (IFR) - Hedge fund Premium Point Investments has sold a $6.2 billion mortgage bond portfolio, the largest sale of its kind in nearly two years, a person with knowledge of the transaction told IFR.
Several investors said the timing of the auction was unusual as many market participants are typically away in the week before the Labor Day holiday.
But it drew interest from multiple bidders, and all 148 bonds included in the portfolio sale - auctioned on Tuesday - had sold, the person said.
The sale is the biggest auction of non-agency mortgage bonds since October 2014, when banks sold a US$5bn list, according to trade data provider Empirasign Strategies.
It included mortgage bonds backed by jumbo home loans created by WinWater Home Mortgage, an affiliate of the hedge fund founded in 2013 to buy up loans for securitization, and riskier subordinate issues that WinWater initially retained for yield.
Also up for grabs were rights to call and service bonds.
There was little detail available, beyond initial talk, on how the bonds were trading, several investors said.
One subordinate B1 class of a 2014 WinWater bond was talked by four dealers in a range of 103 to 107, according to Empirasign. A riskier B2 bond from the issuer's 2015 series was talked at 80 to 105.
"It's pretty illiquid, but at the right price people will love to have this credit," one former banker in the prime jumbo sector said.
One dealer that had marketed the bonds told investors that the list appeared to have gone into an all-or-nothing bid.
Dealers Citigroup, Goldman Sachs, JP Morgan and Morgan Stanley handled the transaction.
WinWater securitized its first batch of loans in 2014, and rose to become a dominate player in the sector alongside mortgage REITs Two Harbors Investment Corp and Redwood Trust.
But despite high hopes, the private-label residential mortgage bond sector remains moribund.
Only US$3.3bn of prime jumbo RMBS has been sold year-to-date, or about a quarter of the US$12bn total issued in 2015, according to Bank of America Merrill Lynch data.
Two Harbors said in July it would shutter its mortgage loan securitization business due to challenging market conditions.
"The wind down process is expected to be substantially completed by the end of 2016," the firm said in a public statement.
A Premium Point spokesperson declined to comment on the status of its funds.
Reporting by Joy Wiltermuth; Editing by Natalie Harrison