CBA back in RMBS market
Commonwealth Bank is working the final weeks of the calendar year hard to drum up new sources of wholesale funding from the domestic market. Its latest innovation is to market mortgage-backed securities, a rarity from a big bank. And, equally rare, the planned bond will not feature the Australian Office of Financial Management as an investor.BankWest, a CBA subsidiary, is the entity selling the pool of A$750 million in home loans, through the Swan Trust 2010-2, though this may be increased if there is sufficient demand. BankWest originated all the loans. Seasoning on the loan pool exceeds two and a half years on average.One tactic CBA is using the attract investors is to include a five-year fixed-term tranche in the financing and organising for UBS to include this tranche in the composite bond index. This step will oblige fixed-interest investors that follow the UBS index to buy the bonds.CBA, once again through BankWest, last sold $586 million of mortgage-backed securities through the Swan Trust 2010-1 in March 2010.The indicative price margins quoted on the current loan pool range from 105 basis points above the one-month swap rate on $358 million in bonds with a weighted life of 1.7 years; 130 bps above swap on a $176 million pool with a life of 2.6 years, and 150 bps on the five-year tranche with $158 million in loans.While the slicing of the present pool is not the same as that sold eight months ago, pricing comparisons are of interest.In March, CBA sold the bonds in the second tranche in the first Swan series - with a weighted average life of 2.9 years - at 130 basis points over bank bills.This is the same spread as in the corresponding tranche in the second Swan series being marketed this week, and, to an extent, undermines the "rising funding costs" theme pushed by Commonwealth Bank and other banks lately.Meanwhile, on Wednesday the Australian Credit Union priced its $530 million RMBS deal. The AOFM invested in a $244 million tranche, with an average life of five years at a spread of 120 basis points.