Reserve bank assistant governor Guy Debelle sparked some lively debate at yesterday's Australian Securitisation Conference in Sydney, when he said that spreads on recent RMBS issues were "close to break-even levels". All speakers said the market had picked up momentum but not everyone was prepared to agree that issuers could make money on current spreads.In the past couple of months issuers have sold more than $2 billion of RMBS that was not sponsored by the Australian Office of Financial Management. There has been a further $2 billion of securitisation of auto loans, commercial property and equipment leases.As a cornerstone investor the AOFM initially accounted for around 80 per cent of the investor base in the RMBS issues it supported. Its participation has come down to around 40 per cent in recent issues.Of all RMBS issues in recent months (including the ones in which the AOFM did not participate) it has only purchased around 25 per cent.Debelle said: "In primary markets the AAA rated tranches of the prime RMBS issued over recent months that have involved the AOFM as a cornerstone investor have priced at 120 to 130 basis points above the bank bill swap rate, with deals that did not involve AOFM support pricing a little higher, at around 140 to 170 basis points."These latter spreads appear to be close to break-even levels. The break-even spread is around 140 basis points, which is in the ball park suggested by our market liaison."Resimac director of securitisation Mary Ploughman said she disagreed with Debelle's analysis. Ploughman said: "The issue price needs to come in tighter. The banks have been very competitive. For us to compete and offer finance for origination we have had to retain pricing that is not supported by our issues."At the senior level it is close but as you move down the capital structure it is a significant multiple."The value of Australian RMBS outstanding has fallen from its peak of around $170 billion in June 2007 to close to $100 billion today.Debelle said: "The narrowing margin between primary and secondary markets, as well as the ongoing amortisation of the existing stock of RMBS, suggests that a more broadly based pick-up in securitised issuance may not be too far off."Colonial First State head of short-term investments Tony Togher said: "There is still a lot of secondary market overhang. People are still looking to offload."It was $100 billion a year ago and it is $75 to $80 billion now."Several investors said they were cautious about investing in RMBS because of extension risk. Others said clients had adjusted mandates to reduce exposure to asset-backed securities.Tyndall Asset Management head of credit John Sorrell said he expected spreads to come in very slowly. "Senior AAA is 140 basis points over now. In 12 months it will be 100 to 120."