The ASF's proposal for a government guarantee of RMBS issuance is another option for revitalising the domestic securitisation market. As we have argued previously, the removal of the government guarantee for bank bond issuance should provide the capacity to guarantee RMBS issuance. Economically, this would be a more attractive proposition than direct investment and it allows more effective stimulation of competition in the residential mortgage market. Needless to say, the major banks are not keen on this proposal.However, there remains the issue of just how much investor demand there is for RMBS. AOFM's efforts at stimulating demand can still be described as being only modestly successful. Nevertheless, there are signs that conditions are improving in the secondary market for RMBS and this will flow through into primary market demand. The overhang of supply coming back from offshore markets is starting to wane, as evidenced by credit spreads recently contracting to the low 200 basis points, from being in excess of 400 bps. Some of the overhang has found a home, some has amortised naturally and of the remainder in offshore portfolios, the managers of those portfolios are probably more concerned about their exposure to Spanish RMBS.Provision of a government guarantee will determine how much real investor demand there is for RMBS and to the extent that there is, facilitate secondary market liquidity.