NEW YORK — Citigroup Global Markets on Thursday bought $1.67 billion of complex residential mortgage assets from a Federal Reserve Bank of New York portfolio taken on during the 2008 bailout of American International Group, according to the New York Fed's website.
The New York Fed had asked Citigroup (C) and six other Wall Street dealers to bid for the "Duke Funding" collateralized debt obligations as part of its effort to wind down the portfolio known as Maiden Lane III. The Duke CDO auction followed sales of $691 million on Tuesday, and others totaling $10 billion earlier this month and in April.
Demand for commercial and residential mortgage bonds backing the CDOs has been generally stronger this year as investors seek their extra yield and real estate markets have shown signs of stability, though the securities have suffered recent setbacks after the European sovereign debt crisis dampened investors' risk appetite this month.
The Duke CDOs contain mostly mortgage bonds backed by "Alt-A" loans issued and securitized through private programs during the real estate boom, according to an investor who has reviewed the securities. Prices on top-quality Alt-A residential mortgage bonds have declined to about 67.25 cents on the dollar from 67.50 cents since April, according to Credit Suisse.
