Domestic investors support doubling in Bendigo RMBS
Bendigo and Adelaide Bank launched its second issue of prime, mortgage-backed securities for the year on Monday. The issue, via TORRENS Series 2010-2 Trust, was launched at A$750 million and follows on from the A$1.1 billion TORRENS Series 2010-1 issue in March.On Thursday the issue was doubled in size to A$1.5 billion and priced. The success of the issue suggests that there is considerable investor demand, at least for short-dated RMBS.Moreover, it appears that ME Bank took an unnecessarily difficult road incorporating a US dollar denominated tranche in its SMHL Securitisation Fund 2010-2E issue, the week before.Bendigo was able to sell A$240 million of Class A1 notes with a weighted average life of 0.3 years at 70 basis over bank bills and A$569 million of Class A2 notes with a weighted life of 1.5 years, at 100 bps over.ME Bank the week before sold US$335 million of notes with a weighted average life of 1.54 years at 120 bps over Libor. After allowing for the basis swap, the Australian dollar equivalent pricing on these notes would have been considerably higher.Bendigo's ability to sell the volume of shorter life RMBS that it did was aided by the Australian Office of Financial Management's willingness to subscribe to the longer life tranches. AOFM took up the largest volume of RMBS since it declared its intention to subsidise such issuance in May.AOFM acquired A$19.5 million of the Class A3 notes and A$476.5 million of the Class A4 notes. In all, $101 million of Class A3 notes with a WAL of 3.0 years were issued and priced at 110 bps over bank bills (indicative pricing had been set at 105 bps). The Class A4 tranche was only A$1.0 million larger than AOFM's take-up and priced at 110 bps over with a WAL of 5.8 years.Interestingly, AOFM seems to have moved its subsidised pricing up on these longer-dated tranches. In the last two deals AOFM has sought a yield of 110 bps over bank bills but was happy with 100 bps over on the first.Pricing was not disclosed on the last two tranches but an indicative price of 150 bps over bank bills was seen for the Class AB tranche, earlier in the week. In any event, A$83 milllion of Class AB notes were sold and A$30 million of Class B notes. Both tranches have a WAL of 4.7 years.