Mortgage bond issuance leaps year to date

U.S. mortgage-backed securities issuance jumped in the first nine months of 2010 from the same period a year earlier as credit markets loosened up and investors' risk appetite improved, a keenly watched survey showed on Thursday.

Thomson Reuters said U.S. mortgage-backed securities issuance totaled $328.2 billion through the third quarter, up from $207.2 billion in the same period a year earlier, a rise of 58 percent.

However, activity slowed in the third quarter.

At $91 billion, third quarter MBS activity in the U.S. is at the lowest quarterly level since the fourth quarter of 2009, said Matthew Toole, an analyst in the deals group at Thomson Reuters.

Also, 95 percent of new issuance this year has been driven by government-sponsored enterprises Fannie Mae, Freddie Mac and Ginnie Mae, he said.

Issuance of bonds backed by companies other than Fannie Mae FMNA.OB and Freddie Mac has virtually come to a halt as investors refuse to buy securities backed by loans where payments are not guaranteed.

Bank of America was the top underwriter of U.S. mortgage-backed securities in the first nine months of 2010, the survey showed.

Bank of America Securities LLC underwrote 55 issues of mortgage-backed bonds, totaling $68.0 billion, for a 20.7 percent market share.

Royal Bank of Scotland, or RBS, ranked second among U.S. MBS underwriters in the third quarter, with a 9.9 percent market share. The company underwrote 35 issues totaling $32.6 billion.

Barclays Capital, the investment banking arm of UK lender Barclays, ranked third, with a 9.8 percent market share. The firm underwrote 39 issues worth $32.1 billion.

Originators have shifted supply to the agency MBS market. The agency MBS market has overwhelmingly captured the lion's share of issuance in 2007, 2008, 2009 and 2010, with non-agency mortgage origination virtually nonexistent as buyers fled the sector on growing concerns about mortgage foreclosures.

Thomson Reuters tracks mortgage bonds backed by whole commercial and residential real estate loans as well as the mortgage-backed securities initially packaged by Fannie Mae, Freddie Mac and Ginnie Mae. Interest-only and principal-only strips of the so-called agencies are not tracked.

(Reporting by Julie Haviv; Editing by Andrew Hay)