Standish Mellon Asset Management LLC, a bond manager overseeing $55 billion, on Thursday said it would launch investments in a federal program to boost consumer and commercial mortgage debt markets.
The Boston-based firm said clients made strong expressions of interest to invest in the Federal Reserve program aimed at expanding consumer lending, whose drop has exacerbated the U.S. recession and biggest financial crisis since the 1930s.
Investor interest in the Fed's Term Asset-Backed Securities Loan Facility has grown since it was first launched in March, with about $11.5 billion in funding requested this month. Under the TALF, investors use the funding to purchase securities backed by auto loans, credit card and small business debt.
The program will soon make eligible bonds backed by commercial mortgages, an area where a lack of financing has exacerbated property price declines by forcing billions of dollars of loans to default.
We believe that investors who are the early buyers of asset-backed securities in the TALF program have the potential for the biggest gains, Desmond Mac Intyre, Standish's chief executive officer, said in a statement.
As more money flows into these investments, the overall spreads should tighten and the opportunities for strong returns will diminish, he added.
Risk premiums on consumer ABS have already dropped by more than half since late last year.
Standish said it would also make investments in residential mortgage-backed securities, which the Fed is considering adding to its program.
Standish is the fixed-income unit of BNY Mellon Asset Management Co., the asset management group of The Bank of New York Mellon Corp
(Reporting by Al Yoon, Editing by Chizu Nomiyama)