Wall Street Stuffed To Capacity With Maiden Lane RMBS

Wall Street is full to capacity and can’t take on much more subprime residential mortgage securitization risk, according to a senior analyst at a major investment bank, noting the poor results from Thursday’s Maiden Lane II auction.

  • 10 Jun 2011
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-- Daniel O’Leary

Wall Street is full to capacity and can’t take on much more subprime residential mortgage securitization risk, according to a senior analyst at a major investment bank, noting the poor results from Thursday’s Maiden Lane II auction.

The Federal Reserve Bank of New York and BlackRock Advisors cleared only roughly 50%, or $1.9 billion, of the portfolio, the worst performing auction to date.

“Two to three months ago it was certain the Street could absorb the whole portfolio,” the analyst said. “It can’t, obviously. Twenty percent of [the diminished appetite] is due to wider credit spread fundamentals, 50% of it is the simple oversupply of bonds and 30% is a weakening in housing market technicals.”

The portfolio is made up of a variety of subprime RMBS the Fed bought from American International Group at the height of the crisis as part of the latter’s bailout (TS, 4/6).

An internal memo from a primary deal detailing the auction said most of the bonds that cleared were on average three to four basis points below price talk. “The composition of the list was 67% non agency and 33% subprime. Of the approximately $2.55 billion in non-agency out for the bid 57% or $1.47 billion traded. In subprime space only 34% of the $1.25 billion out for the bid traded,” the memo said. The analyst said the low clearance rate together with the low clearing levels showed the Street is now unwilling to pay above the Fed’s minimum asking price.

Spokespeople at the Fed and BlackRock did not return phone calls.

  • 10 Jun 2011

GlobalCapital European securitization league table

Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Bank of America Merrill Lynch (BAML) 7,026 25 11.95
2 Citi 6,449 21 10.96
3 BNP Paribas 5,093 18 8.66
4 Barclays 4,040 11 6.87
5 Lloyds Bank 3,615 14 6.15

Bookrunners of Global Structured Finance

Rank Lead Manager Amount $m No of issues Share %
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  • Today
1 Citi 120,318.45 348 12.81%
2 Bank of America Merrill Lynch 99,988.41 288 10.64%
3 Wells Fargo Securities 88,516.28 265 9.42%
4 JPMorgan 69,240.12 209 7.37%
5 Credit Suisse 51,378.45 156 5.47%