Some of the same forces that helped Wall Street's biggest firms make lots of money buying and selling bonds are also responsible for a giant, unexpected third-quarter loss at Bank of New York Mellon (BK), the company said Tuesday.

The largest of the so-called custodial banks that specialize in holding investors' securities lost $2.46 billion, or $2.05 a share, after taking an enormous charge to mend its own portfolio of mortgage-related investments, it said.
"We took advantage of the recent strength in the fixed-income markets by selling or recognizing losses on a significant portion of our investment securities portfolio," said CEO Robert Kelly in a statement.

Take out the restructuring costs and Bank of New York Mellon would have posted a gain of 54 cents a share, beating an average estimate of 46 cents a share in a Thomson Reuters poll of analysts. That's compared with a $1.17 a share profit a year ago.

That helped company's stock surged in midday trading, gaining as much as 7.6 percent, compared with a 0.86 percent dip for the S&P 500 around noon.

Unrealized losses on securities remaining on the company's balance sheet fell to $1 billion from $4.8 billion in the second quarter, also thanks to the improving fixed-income trading outlook. Reconfiguring the portfolio will reduce the risk of future losses on toxic securities, Kelly said.

"We sold everything that we thought was either overvalued or had further downside," he said in a conference call with investors. "Stuff where we really think we have upside, we didn't want to say good bye to it."