Pacific Investment Management Co. has bought mortgage-backed securities from Israel's Bank Hapoalim Ltd. for $2.55 billion, Bloomberg News reports.

PIMCO, the manager of the world's biggest bond fund, took all the mortgage bonds held by Israel’s biggest bank, which is nursing the most losses from the U.S. subprime crisis of any Israeli bank. Newport Beach, California-based Pimco lifted mortgage-related holdings to the highest since 2000.

''Large parts of the mortgage market are trading cheap,'' said Jim Reid, head of fundamental credit strategy at Deutsche Bank AG in London. ''You can still be bearish on house prices and think that the mortgage-bond market offers good value.''

Record delinquencies on subprime mortgages in the U.S. triggered a slump in credit markets, forcing banks and financial companies to post $380 billion of writedowns on investments.

Managers at insurers and mutual funds including PIMCO are in a good position to buy distressed assets from banks because