Goldman's bet on mortgage bonds proved well-timed - Bloomberg

Goldman Sachs Group's (GS +0.2%) move to snap up mortgage bonds amid panic selling almost certainly made money after the Fed introduced a stimulus to stabilize the market, Bloomberg reports.

The Wall Street bank bought mortgage-backed securities from funds, which had bought them with borrowed money and needed to unload them fast, people familiar with the matter told Bloomberg.

Goldman gets a fee for helping funds and investment trusts get out of repurchase agreements; it also makes money if the bonds gain in value during the period it holds them.

For the MBS sellers, the trade allowed them to free up cash and to avoid daily margin calls in what was a rapidly declining market.

Soon after Goldman bought the bonds, the Fed unveiled a plan to buy unlimited amounts of Treasury bonds and mortgage-backed securities to calm the markets. It didn't just calm the markets, but it spurred a rally.

Goldman was able to sell some securities to the Fed and those that didn't qualify gained in value as a result of the rally.

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