ME completes its biggest post-GFC RMBS issue

The problems the Australian Office of Financial Management is having selling its portfolio of residential mortgage-backed securities do not appear to be having a negative impact on the primary market for RMBS issuance, with ME completing its biggest issue since the financial crisis.

ME (formerly ME Bank) launched SMHL Series Securitisation Fund 2015-1 on Monday, seeking A$500 million of funds. When the deal closed yesterday the bank had raised $1.5 billion.

ME will pay a margin of 95 basis points over the one-month bank bill swap rate on the $1.38 billion of A1 notes, which have a weighted average life of 2.8 years.

Pricing on the $41.2 million of A2 notes, which have a weighted average life of 2.8 years, was 102 bps over the swap rate.

Pricing on the $50.2 million of B notes, which have a weighted average life of 5.6 years, was 230 bps over the swap rate.

Pricing on the $18.7 million of C notes, which have a weighted average life of 5.6 years, was 285 bps over swap.

Pricing on the $4.5 million of D notes, which have a weighted average life of 5.6 years, was 400 bps over swap.

And pricing on the $5.2 million of E notes, which have a weighted average life of 5.6 years, was 600 bps over swap.

ME's general manager markets, John Caelli, said 22 parties bought notes, with 96 per cent of the deal sold locally and 46 per cent sold to real money investors.

Caelli said it was ME's first RMBS issue not fully mortgage insured.

Pricing was in line with other recent deals. Bendigo and Adelaide Bank paid a margin of 92 bps over swap on the A1 notes of its Torrens Series 2015-1 issue in June and Firstmac paid 98 bps on the A1 notes of its $1 billion issue in May.

The increase in RMBS pricing, which saw margins increase by ten to 15 bps late last year and early this year, appears to have plateaued.