Lloyds Banking Group is looking to sell about $8.7bn of US mortgage securities, a person with knowledge of the auction said, in the bank's latest move to raise capital by selling noncore assets.

The assets are a mixture of risky residential mortgage-backed securities issued by Wall Street banks before the financial crisis, according to Empirasign Strategies, a trade database. Demand for these bonds, which aren't backed by US-government-controlled Fannie Mae or Freddie Mac, has soared since early 2012 as rising US home prices has led investors to make bullish bets on assets that have been trading at distressed levels.