The securities are bouncing back "almost like a coiled spring," Clayton DeGiacinto, chief investment officer of hedge fund Axonic Capital LLC said in a telephone interview.

"Risk appetite among the dealers" has increased, said DeGiacinto, a former Goldman Sachs trader whose New York-based firm oversees about $350 million. "A lot of people came in on Wall Street in January and realized they didn't have any inventory."

Dealers have trimmed their stockpiles of debt including corporate bonds and mortgage securities without government backing to the lowest level in almost a decade, Fed data show. The holdings fell to $43 billion as of the week ended Feb. 1, down from 2011's peak in May of $94.9 billion.

The Fed's portfolio from AIG includes bonds backed by the types of home loans with some of the highest default rates, such as subprime, Alt-A and option ARMs. Those securities, which can be difficult to value, offer a chance for a bigger profit to a savvy investor.

Renewed demand doesn't mean a property rebound is near. Appetite for the non-agency debt is growing because of the potentially high yields rather than any changes in bond buyers' views on housing, said DeGiacinto.

Almost 28.3 percent of home loans pooled in bonds without government backing are at least 60 days delinquent, in foreclosure or already turned into seized property, according to data compiled by Bloomberg. The share has fallen from a record 30.2 percent in March 2010 as new defaults eased while regulatory probes into foreclosure practices slowed liquidations of bad debt.

Bass Generally Bearish

Bass is seeking to raise money for a residential mortgage- backed securities fund, according to two people with knowledge of the plans, who asked not to be identified because the information is private.

"We believe that regulatory changes, rating downgrades and continued bank deleveraging have caused a dislocation between credit fundamentals and prices for many asset-backed securities," his firm, Hayman Capital Management LP, said in marketing documents.

Bass has remained generally bearish amid mounting concern driven by government deficits. He told overseers of Texas's state university endowment on Feb. 2 that "as every day goes by, I see deflation in the things you own and inflation in the things you need."

Chris Kirkpatrick, general counsel at Dallas-based Hayman, declined to comment.