Non-bank credits best mortgage securitisation conditions since the Global Financial Crisis
Non-bank lender Resimac Group has cemented its biggest deal in more than a decade, crediting the best mortgage securitisation conditions since the Global Financial Crisis.
Resimac announced on Thursday that it had settled a $1.5 billion residential mortgage-backed securitisation, according to a report by The Australian Financial Review. The deal is Resimac’s first in 2021.
The securitisation’s senior notes, valued at $720 million, were priced at 80 basis points above the one-month bank bill swap benchmark interest rate. That’s the smallest margin achieved by a non-bank since the GFC, according to AFR. It’s about half the margin Resimac managed in a $500 million deal in July 2020, which priced at 155 basis points.
Overall, the weighted average margin for Resimac’s $1.5 billion Premier Series 2021-1 RMBS deal was 102 basis points. Senior tranche notes denominated in US dollars priced at 70 basis points above benchmark, AFR reported.
Resimac group treasurer Andrew Marsden said that global investor appetite for residential mortgage-backed securities was “pleasingly strong.”
“The deal was heavily over-subscribed and we expect issuance conditions to remain supportive to our growth objectives throughout 2021,” he told AFR. “We are looking forward to bringing further bond transactions to the market in 2021. Our short-term funding costs are reducing as wholesale lending markets are repricing. With heightened home-loan activity expected over the remainder of 2021, our funding initiatives should provide a strong platform to take advantage of opportunities in the Australian mortgage market.”
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Resimac said that the Australian Office of Financial Management did not buy any of the notes. The non-bank said that the RMBS market was benefiting from both Australian and offshore demand from asset managers and bank treasury portfolios.
“Offshore investors are showing increasing interest in Australian RMBS due to a recognition that Australia is outperforming other jurisdictions in both the pandemic and economic recovery,” a Resimac spokesperson told AFR.
While the economic recovery from the COVID-19 crisis has spurred favourable financial conditions, financial institutions dependent on international securitisation markets say they are still at a competitive disadvantage to the major banks due to the Reserve Bank of Australia’s Term Funding Facility, which provides cheap three-year funds to the banks. In September, the RBA expanded the TFF from $57 billion to $200 billion and extended its duration through June. Under the scheme, banks can borrow money to lend at a low rate of 0.1%.
But since non-banks can’t access the TFF, they have to turn to international markets to borrow at the market rate. Although the government has committed $15 billion to buy tranches of RMBS to help keep non-banks’ funding costs down, there’s still a significant funding gap between the two sectors, AFR reported.
