The fiercely competitive nature of Wall Street was on full display recently when two large investment banks seemed to be squaring off over the lead role on upcoming issuance of bonds that seemingly do not exist.
Credit Suisse, which recently hired Mike Dryden from Barclays Capital, said the recruit would help it target legacy issuance from the National Credit Union Administration. Dryden was instrumental in structuring the bonds for BarCap in 2010. For their part, BarCap officials said they intended to defend that turf and continue to lead NCUA issues. The only problem? The NCUA says there's no business left for the banks to vie for. After TS ran its original story the NCUA was quick to point out that fact. As far as it was concerned, it was done, the trough was empty.
But that hasn't stopped hungry investors baying for more bonds. The NCUA transactions were a unique beast and one the buyside is sorely missing, according to portfolio managers. Where else could they pick-up subprime assets with a government guarantee and the yield that goes with it? The sheer appetite investors have for such assets undoubtedly was a reason why the banks worked at the NCUA business with hammer and tongs.
Still, a straight sale of legacy credit crunch collateral is a tricky business. The liquidation of the Federal Reserve Bank of New York's (unguaranteed) Maiden Lane II portfolio gapped out spreads in the secondary RMBS market to the point that the Fed recently halted further auctions. This will just make the competition for any future fully government-backed contracts even more fierce.