Aussie RMBS Issuance Poised for Recovery?

In the past, we have looked to the Australian securitisation market for signs of recovery (or further deterioration) from the great credit crisis.

In late November, Guy Debelle Assistant Governor for Financial Markets of the Reserve Bank of Australia made a speech to update the markets on the state of the bellweather Australian residential mortgage-backed marketplace.  The overall conclusion was that while the market still has some way to go on the road to health, there are many “relatively” positive signs coming from the Australian RMBS market.

We have always liked to utilize the Australian market as a measuring stick for how the market, in general, is performing because:

* It is relatively small and therefore easier to understand (certainly easier than the US market)

* The market has been among the most progressive in the world, as it relates to accommodating the development of securitisation as an important component for capital formation among financial institutions

* The market has always been accommodating to offshore participants, whether they be issuers, arrangers or investors.  The result has been the development of highly consistent and predictable “Aussie Product” which is widely accepted in other markets.

Mr. Debelle’s speech contained a number of useful graphs, two of which we show here.

This first graph shows the historical importance of offshore funding for the Australian RMBS markets.  No matter what steps the Australian Government takes to stimulate a re-birth in the securitisation market, it is clear that the point that they must keep one eye on the offshore investor has not been lost on Government officials (a good sign and perhaps a lesson for their US counterparts).

We also like this next graph which provides comparative statistics for non-performing mortgages in each of the major global markets.   Based on this chart, one could conclude that if there is a market ripe for leading the recovery of new RMBS issuance, it may very well be Australia. 

A stable, government friendly market with a strong track record for ‘global investor participation’ would seem to be as ripe a place to start the mortgage-backed recovery as any.

About markferraris
Managing Principal Orchard Street Partners LLC

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