Prospects improving for structured finance

Structured finance issuance has been abysmal for the second year in a row. Westpac's mammoth (by current standards) $2 billion RMBS issue last week takes the structured finance total for the year to $16.4 billion, just ahead of the miserable $14.4 billion achieved in 2008.

However, the Australian Office of Financial Management should be thanked for absorbing $5.3 billion of RMBS issuance this year. Last year it accounted for $2.5 billion of issuance.

Clearly, the performance of the structured finance sector would have been worse, if not for the assistance provided by AOFM. Nevertheless, with $4.65 billion of non-AOFM backed RMBS sold in the last two months, the outlook for the structured finance sector in 2010 is considerably stronger than it was at the end of last year. If covered bond issuance is approved, it will be even better.