* Bond trading boom sparked by Fed rate cuts * Wall Street banks dominate $251 bln daily market * Top traders eye big bonuses By Sinead Cruise and Lawrence White LONDON, Oct 15 (Reuters) – Global banks earned $1 billion from trading government-backed U.S. mortgage securities in the first half of 2019, data shows, a fivefold increase on last year for what industry sources say is the fastest growing revenue source in investment banking. The shift this year to a more dovish interest rate policy by the U.S. Federal Reserve has sparked a surge in investor demand for packaged-up home loans issued by mortgage agencies Fannie Mae, Ginnie Mae and Freddie Mac. Banks that trade these securities, known as agency residential mortgage-backed securities (RMBS), have profited both from increased commissions on trading them as well as holding them on their books as they appreciated in value. The boom in trading comes just over a decade after the global financial crisis, caused in part by the collapse in value of much riskier bonds linked to U.S. home loans that banks packaged up and sold to unwitting investors. Agency RMBS are considered far safer and higher quality than the subprime pools that… Read full this story
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