Bloomberg News

Morgan Stanley Non-Agency Mortgage Trader DePietro Said to Leave

November 17, 2011

Nov. 16 (Bloomberg) -- Morgan Stanley’s Michael DePietro, head of trading for U.S. home-loan bonds without government backing, left the firm amid a slump in the market, according to three people familiar with the matter.

DePietro, an executive director at the New York-based bank who led U.S. non-agency residential mortgage-backed securities trading, departed this week along with Steven Sasson and another member of his group, said two of the people, who declined to be identified because the moves weren’t public.

Rebecca Hogan, a managing director who heads the bank’s consumer asset-backed securities trading business, will take DePietro’s post, one of the people said.

Wall Street firms’ inventories of non-agency securities have declined in value as Europe’s debt crisis drives down prices for risky bonds. Morgan Stanley posted a 17 percent decline in third-quarter fixed-income trading revenue from a year earlier, excluding accounting gains. That was driven in part by “relative weakness” in mortgage trading, Chief Financial Officer Ruth Porat said on an Oct. 19 conference call.

Mary Claire Delaney, a spokeswoman for Morgan Stanley, declined to comment on the departures, as did DePietro. Sasson didn’t immediately return a message left on his cell phone.

Morgan Stanley posted trading losses on 31 days in the third quarter, the most since 2008, according to a filing with the Securities and Exchange Commission.

The rout in the $1.2 trillion market for non-agency bonds began in May as the Federal Reserve’s auctions of bonds assumed in its American International Group Inc. bailout added to dealer stockpiles. Non-agency mortgage notes lack guarantees from U.S.- backed Fannie Mae, Freddie Mac or Ginnie Mae.

Subprime Securities

Floating-rate subprime mortgage bonds from the credit bubble have lost 13 percent on average since February, Barclays Capital index data show, with some debt tumbling 30 percent, according to investment firm Ellington Financial LLC.

Trading has also slowed. In the past five weeks, dealers have conducted auctions for $14.8 billion of non-agency debt, down from $26.1 billion in the first five weeks of the year, according to data from Empirasign Strategies LLC. Investment banks reported completed sales of $4.4 billion of the bonds offered in the most recent period, according to the New York- based provider of data on securitized-debt trading.

--With assistance from Sarah Mulholland in New York. Editors: Steve Dickson, Dan Reichl

To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net; Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net; Rick Green at rgreen18@bloomberg.net


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