Australia’s reliance on offshore investors is stifling local RMBS activity, despite the underlying health of the Australian mortgage market.
With no major RMBS issues so far this year, pressure is now mounting on many securitised lenders to offload debt via the capital markets and inject much needed liquidity.
According to Chris Green, general manager of Perpetual’s Trust and Fund Services, offshore investors are yet to distinguish between quality Australian paper and other RMBS products that have sustained significant losses.
“Investors are currently shying away from most forms of RMBS in the global capital markets,” Mr Green said. “There has been a re-rating of risk and as an asset class RMBS has been most affected.”
According to Green, there have been a number of small deals already done in 2008, “but until the secondary market spreads come in, primary issuance at more significant levels is likely to be some way off.”
And when the market returns to more normal issuance levels, pricing will be higher than that seen during the first half of 2007, said Mr Green.
“Risk on RMBS had been re-priced and investors will demand higher spreads as a result. That doesn’t mean that bank and non-bank funding models are no longer viable, as to varying degrees the higher cost of funds has been passed on to borrowers.”
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