The New York Federal Reserve conducted its sixth auction from its Maiden Lane II portfolio today.
The Fed is "pleased" with the results so far, according to a Wall Street Journal report. To date the Fed has circulated five lists with asset sales usually ranging from $1.5 billion to $2 billion per week. An estimated $20 billion in asset sales are left to be done, according to market reports.
Adam Murphy, president of Empirasign Strategies, said that the weighted average cover bid for the bonds sold so far is $49.27, with approximately 86% of the bonds out for auction meeting reserve levels and have traded.
It is likely that the subprime bid will remain a buyer's market over the life of the Maiden Lane II auction as the bid for this paper was too tight at the beginning of the year.
"The non-agency market has been significantly weaker as of late — subprime doing worse than prime/Alt-A," Murphy said.
He cited the overly tight spreads earlier in the year, Maiden Lane II selling, continued housing market weakness, as well as today's announcement from Bank of America that it is looking to sell its $850 billion portfolio of nonperforming loans as factors leading to the widening in non-agencies.