Subprime bonds back in fashion

April 01, 2011 12:31PM

Subprime mortgage bonds, the financial instruments widely blamed for helping to set off one of the worst recessions in recent history, are staging a comeback. According to the Wall Street Journal, long-term investors are getting back in the game of buying risky assets, buoyed by a renewed confidence in the economy and super-low interest rates. They’ve generated so much demand that prices for subprime bonds — securities backed by loans to homeowners with low credit scores — are now double what they were at the depths of the real estate crash. Taking advantage of the price recovery, the Federal Reserve announced Wednesday that it is planning a sale of billions of dollars in subprime mortgage bonds it acquired as part of the American International Group bailout in 2008. [WSJ]

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