RMBS market stays the course

John Kavanagh

Bluestone is the latest lender to complete the mortgage securitisation transaction in a market that continued to function throughout the COVID-19 crisis, with the support of the Australian Office of Financial Management.

Bluestone issued A$350 million of residential mortgage-backed securities last week, its first securitisation for 2020. Sapphire XXII 2020-1 Trust was backed by a pool of non-conforming loans, with 95 per cent prime or near-prime loans.

Bluestone chief executive Campbell Smyth said the make-up of the pool reflected Buestone’s move towards cleaner credit originations.

The issue included $70 million of A1S notes, with a weighted average life of 0.6 of a year and rated AAA, priced at 95 basis points over the one-month bank bill swap rate.

The A1L notes - $175 million, with a weighted average life of 2.5 years and rated AAA– were priced at 165 bps over BBSW.

The other AAA notes, A2 - $61.2 million, with a weighted average life of 2.5 years – were priced at 210 bps over BBSW.

The B, C and D notes – rated between AA and BBB - were priced between 300 bps and 525 bps over BBSW.

The AOFM did not invest in the primary issue. As it has done with other issues, it support the deal with $100 million of “switches” – buying securities from investors in the secondary market to free up funds for them to invest in the Bluestone deal.

Smyth said: “We are grateful for the AOFM’s support. We are optimistic that the market will support another issuance before the end of 2020.”

The AOFM’s strategy for supporting the securitisation market appears to be through these “switch” transactions. In May, it supported La Trobe Financial’s $1.25 billion RMBS by investing in two prior transactions.

The AOFM has also participated in primary issues. In May, it bought $64.5 million of A2 notes issued by Liberty Financial, in a deal that include yen notes.

June was a busy month for the securitisation market. In addition to the Bluestone deal, Liberty Financial raised $800 million, paying 100 bps on the top notes; Pepper raised $700 million, paying 105 bps on the top notes; and Columbus Capital raised $600 million, paying 140 bps on the top notes.

The followed deals by Resimac, La Trobe and Liberty Financial in May.