Volcker Stoking Rally in TruPS as Buyers Circle: Credit Markets

A new rule forcing banks to sell a type of complex debt security created before the financial crisis is having a surprising effect: luring buyers to the market and driving up the prices of those bonds.

Portions of collateralized debt obligations that are backed by trust-preferred securities issued by banks, known as TruPS CDOs, have more than doubled the past year to almost 40 cents on the dollar in some cases, according to prices from JPMorgan Chase & Co. One lender that planned to write down its holdings to almost zero is now seeking as much as 25 cents on the dollar, according to Mike Manning, co-founder of DealVector Inc., which runs an electronic system that connects buyers and sellers of the debt.