The Dutch State Treasury plans to auction another $2.5 billion of non-agency residential mortgage bonds held in the ING Illiquid Assets Back-up Facility.

The facility was established in 2009, at the depth of the financial crisis, in order to reduce the risk and uncertainty for ING from a portfolio of US RMBS securities. On Dec. 11, the government auctioned $5.1 billion of the non-agency RMBS bonds. The two sales combined make up about 1% of the $737 billion par value outstanding in the non-agency market, according to Standard & Poor’s.

In a press release, the Treasury said it is moving ahead with the sale based “on the continued improvement in the U.S. housing market and a high level of interest by investors for non-agency RMBS securities.”

The first public auction was heavily composed of pay option ARM mortgages. According to structured finance analytics firm Interactive Data, the first sale accounted “for nearly half of all holdings based on current face balance.”

On a weighted average basis, the bonds sold last month had an evaluated price of roughly $60 per $100 of face value; the remaining portfolio has a higher average of $84 of $100 face value

“The remaining portfolio experienced a meaningful shift toward fixed-rate collateral, with more than 50% now in this subsector, up from only 37% previously,” according to Interactive Data. “Regarding underlying loan credit quality, the DSTA portfolio appears to have been left with better performing securities in the wake of the first bid list sale.”  

Blackrock Solutions is managing the latest sale, which will take place via a competitive auction process through a number of selected broker-dealers.

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