WESTPAC has launched a $1 billion program of residential mortgage-backed securities, breaking a drought that goes back to 2007.
The AAA-rated issue, also the first by a major domestic bank since the global financial crisis, underlines increasing confidence by global investors, particularly in the quality of Australian housing stock.
The deal is expected to be priced on Friday at a margin of about 1.3 per cent over the swap rate.
It involves prime residential mortgages originated by Westpac's branch network and by accredited brokers, with a weighted average loan to valuation ratio of 58.3 per cent.
Less than 1 per cent of loans have LVRs greater than 80 per cent, and on average they are almost three years old.
There are no low-doc loans in the pool.
Securitisation is currently more expensive than domestic bond issuance.
However, banks want to maintain diversity of funding sources, and are therefore prepared to pay more to keep their options open, as well as wean themselves off the federal government's wholesale funding guarantee.
The higher cost of RMBS will maintain pressure on bank funding costs, which was cited by three of the four major banks earlier this month as the reason they increased their variable mortgage rates by more than the 25 basis-point adjustment in the cash rate.
Earlier this month, Bendigo and Adelaide Bank priced a $1bn RMBS issue, which, in another milestone, was the first by a regional bank this year without investment support from the Australian Office of Financial Management.
The return of the major banks will represent a major fillip to securitisation, which was a $50bn market before the financial crisis.
Westpac, though, has not been a huge issuer over the years.
Its last deal, in 2007, was a big one at $7bn, but the bank has only done seven others, including the one launched yesterday, since 1998.
The reopening of the securitisation market follows predictions of a comeback last month by Reserve Bank financial markets assistant governor Guy Debelle.
However, a return to the "heady days of earlier this decade" was unlikely, Mr Debelle said.
The domestic market had been tarred with the same brush as the US, despite the fact that it continued to perform well and was more transparent and less complex.
Also unlike the US, prime loans made up 97 per cent of the market.
Jenny
Source
The AAA-rated issue, also the first by a major domestic bank since the global financial crisis, underlines increasing confidence by global investors, particularly in the quality of Australian housing stock.
The deal is expected to be priced on Friday at a margin of about 1.3 per cent over the swap rate.
It involves prime residential mortgages originated by Westpac's branch network and by accredited brokers, with a weighted average loan to valuation ratio of 58.3 per cent.
Less than 1 per cent of loans have LVRs greater than 80 per cent, and on average they are almost three years old.
There are no low-doc loans in the pool.
Securitisation is currently more expensive than domestic bond issuance.
However, banks want to maintain diversity of funding sources, and are therefore prepared to pay more to keep their options open, as well as wean themselves off the federal government's wholesale funding guarantee.
The higher cost of RMBS will maintain pressure on bank funding costs, which was cited by three of the four major banks earlier this month as the reason they increased their variable mortgage rates by more than the 25 basis-point adjustment in the cash rate.
Earlier this month, Bendigo and Adelaide Bank priced a $1bn RMBS issue, which, in another milestone, was the first by a regional bank this year without investment support from the Australian Office of Financial Management.
The return of the major banks will represent a major fillip to securitisation, which was a $50bn market before the financial crisis.
Westpac, though, has not been a huge issuer over the years.
Its last deal, in 2007, was a big one at $7bn, but the bank has only done seven others, including the one launched yesterday, since 1998.
The reopening of the securitisation market follows predictions of a comeback last month by Reserve Bank financial markets assistant governor Guy Debelle.
However, a return to the "heady days of earlier this decade" was unlikely, Mr Debelle said.
The domestic market had been tarred with the same brush as the US, despite the fact that it continued to perform well and was more transparent and less complex.
Also unlike the US, prime loans made up 97 per cent of the market.
Jenny
Source