Wall Street Pulls Back From Mortgage Market That Fed Made Boring (Regulation Didn’t Help Either)

(Before It's News)

wallstreetexaminer.com / by Anthony B. Sanders • February 5, 2016

This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.

Bloomberg — Matt Scully — The U.S. Federal Reserve is squeezing a good deal of the profit out of mortgage bond trading, and Wall Street banks are increasingly heading for the exits.

Barclays Plc cut 20 jobs in its U.S. government-backed mortgage bond business in January as part of a broader bank reorganization that is cutting 1,200 jobs, according to a person with knowledge of the matter. Deutsche Bank AG and Societe Generale SA have also scaled back in the market in recent weeks, people with knowledge of those moves said.

As the Federal Reserve has vacuumed up nearly a third of the government mortgage bonds in the market as part of its quantitative easing program since early 2009, average daily trading volume has plunged by more than 40 percent. Unlike other investors, the central bank rarely trades its mortgage bonds.

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