JP Morgan Is Flush With Depositor Cash, Going On MBS Shopping Spree

Supermarket Sweep Logo

Photo: Flickr

2010 is really the year for the asset-backed securities. As banks continue to ramp up securitization, others are going out and buying them in larger quantities.Like JP Morgan for instance.

According to the latest issue of Asset Backed Alert, JP Morgan is “flush with cash from depositors,” and thus is looking for ways to invest it rather than just letting it sit around.

And the buying has seriously begun: JP Morgan just closed a $1.5 billion deal to buy mortgage-backed securities issued by Banco Santander unit Alliance & Leicester. But these aren’t the kind of MBS that got us into the financial crisis in recent years; these are prime-quality, UK home loans priced at 140 bps over LIBOR.

An analyst quoted in the article says that mortgage-backed securities offer attractive returns. “They’ve got a lot of dry powder to grow,” says the analyst. And thanks to JP Morgan’s renewed interest in MBS, the market is alive and liquid. In fact, many banks are refusing to part with their mortgages for “anything less than top dollar.”

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at