Goldman Sachs Group Inc. held on to almost all of the $6.2 billion in face value of mortgage bonds that the Federal Reserve Bank of New York sold the company yesterday, based on data from Trace, the transaction reporting system of the Financial Industry Regulatory Authority.
Customers bought $961 million of speculative-grade home-loan bonds from dealers yesterday while selling $6.9 billion, according to the data. Trading of investment-grade debt totaled $385 million, while dealers traded about $45 million of both types of bonds among themselves, the data show.
“It certainly looks like they’re willing to provide liquidity to the market by bidding for their own account,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “It’s a little bit of shift,” after a period in which dealers reduced their inventories, he said.
Goldman Sachs, the most profitable securities firm in Wall Street history before converting to a bank in 2008, won an auction of bonds assumed in the U.S. central bank’s rescue of American International Group Inc. after the New York Fed put the pool out for competitive bidding following an offer from Credit Suisse Group AG, the New York Fed said yesterday in a statement.
The weighted average price of non-investment grade, or junk, securities traded yesterday was 57.8 cents on the dollar, according to Trace data. High-yield, or junk, bonds are rated lower than Baa3 by Moody’s Investors Service and below BBB- by Standard & Poor’s.
On Jan. 19, when Credit Suisse won the New York Fed’s last auction of bonds from its AIG-tied Maiden Lane II vehicle, customers bought $4.7 billion of home-loan bonds with junk ratings from dealers and sold $6.7 billion, the data showed. The central bank sold $7 billion of securities that day.
“Our intention has always been to distribute the portfolio to our clients globally and we are in the midst of doing that,” Michael DuVally, a spokesman for New York-based Goldman Sachs, said today in an e-mail.