Mortgage-Backed Securities to Save Financials?
The "Fast Money" traders were focused on the financial sector early Wednesday morning after reports that three major Wall Street firms were planning to sell $4 billion in mortgage-backed bonds.
JPMorgan Chase , Deutsche Bank and UBS were reportedly planning to sell bonds backed by commercial property next month.
The issue interested the traders because of the role such mortgage-backed securities played in the financial crisis. Mortgage-backed securities are bundles of mortgage loans that are secured by the underlying properties. Such securities caused massive losses at major banks when the housing market crashed.
Earlier this week, Bank of America agreed to pay $2.8 billion to Freddie Mac and Fannie Mae for bad mortgage loans that were issued by Countrywide and then bundled and sold to the two institutions.
“There are a lot of new mortgage backed bonds brought to market,” said Tim Seymour, founder of EmergingMoney.com. “Who is exposed to this on the capital market side and what does it mean for the guys that were the most beaten up by it?”
Kanundrum Capital’s Brian Kelly was also watching the mortgage-backed bond space. He was focusing on whether real estate investment trusts, however, were investment opportunities given their exposure to such securities.
Mortgage-REIT Annaly Capital Management unveiled plans to offer 75 million shares this week in order to raise money to purchase more mortgage-backed securities for its portfolio.
“I think RIETS are an interesting way to play financials without the bank issues,” said Kelly.
This is just a sample of the conversation the traders will be having on Wednesday's "Fast Money Halftime Report" and "Fast Money."
For more on these topics and the best market insight, catch "Fast Money" week nights at 5pm ET, and the ‘Halftime Report’ weekdays at 12:30pm ET on CNBC.
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CNBC.com with wires.