Mortgage Bond Sales Flood Market Amid Pleas for Help From U.S.

(Bloomberg) — A crisis in credit markets deepened over the weekend as a cluster of funds that own mortgage bonds and other asset-backed securities sought to sell billions of dollars in assets, with one fund blaming unprecedented withdrawals by investors.

The sales included at least $1.25 billion of securities being listed by the AlphaCentric Income Opportunities Fund, according to people with knowledge of the sales. It sought buyers for a swath of bonds backed primarily by private-label mortgages as it sought to raise cash, said the people, who asked not to be identified discussing the private offerings.

“The coronavirus has resulted in severe market dislocations and liquidity issues for most segments of the bond market,” AlphaCentric’s Jerry Szilagyi said in an emailed statement on Sunday. “The Fund is not immune to these dislocations” and “like many other funds, is moving expeditiously to address the unprecedented market conditions.”

The best way to obtain favorable prices is to offer a wider range of securities for bid he said, declining to discuss the amount of securities the fund put up for sale.

Funds that buy up bonds of all kinds — from debt of America’s largest corporations to securities backed by mortgages — have struggled with record investor withdrawals amid choppy trading conditions in fixed-income markets. The rush to unload mortgage-backed securities signals that a credit meltdown that began with corporate bonds is spreading to other corners of the market.

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Source: Yahoo