Lloyds Auctions Off $8.7B In U.S. Mortgage Bonds

Four investment banks have reportedly bought $8.7 billion in U.S. residential mortgage-backed securities (RMBS) that were auctioned by Lloyds TSB on Thursday.

News that Lloyds was planning to auction the bonds came earlier in the week, with media outlets citing unnamed sources.

The private-label mortgage bonds – comprising subprime, Alt-A and prime RMBS issued between 2005 and 2007 – were divided into five groups, two of which were purchased by Morgan Stanley, while the remaining three were bought by Credit Suisse, Goldman Sachs and Bank of America, according to a Reuters report.

Lloyds auctioned the bonds as part of its ongoing strategy to sell non-core assets in order to shore up capital. The sale comes about a week after the Prudential Regulation Authority finalized capital requirements for lenders.

It is the largest secondary-market all-or-nothing mortgage-bond trade since last year's Maiden Lane sales from the New York Fed, according to the report.

Returns on US private-label legacy RMBS have been up in recent weeks due improving conditions in the housing market.


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