Investors from TCW Group Inc. to Metacapital Management are growing more cautious on the riskier tiers of U.S. mortgage bonds as a rally in subprime debt accelerates after gains of more than 41 percent last year.
Prices of senior securities tied to so-called option adjustable-rate mortgages that allow homeowners to pay less interest than they owe rose last week to the highest levels since 2008, climbing to 69 cents on the dollar from 65 cents at the end of 2012 and 52 cents a year ago, according to Barclays data. Subprime debt issued before the housing bubble burst in 2007 has returned 4.7 percent this year, its data show.
