The giant market for securities backed by US subprime mortgages was thrown into turmoil on Wednesday as lenders struggled to sell more than $1bn of assets seized from two Bear Stearns hedge funds that suffered heavy losses on subprime bets.

The complex securities being auctioned are rarely traded and early attempts to sell the collateral met with mixed results. The prospect of the “fire sale” knocked down prices for similar mortgage-backed assets and sent a key derivative index for the market to record lows.