The big question at yesterday's Australian Securitisation Forum conference in Sydney was how much secondary market overhang there was in the RMBS market.Representatives of various funds management groups on conference panels all said they could not justify investing in primary issues when there was still plenty of cheap stock in the secondary market.On top of that, their appetite for RMBS was constrained by their clients' concerns about liquidity.Colonial First State head of short-term fixed interest investments, Tony Togher, made a stab at estimating the size of the overhang."Standard & Poor's reported that at the end of September there was $135.2 billion of outstanding RMBS eligible for secondary market transactions."Over the two years to the middle of last year SIVs took up about 50 per cent of what was issued - probably around $50 billion. "A significant proportion of that is still being unwound. There is no benchmark price; it varies with the issue, the conditions on the day and the state the seller is in. It can be anywhere from 250 to 600 points over." The head of credit at Tyndall Investment Management, John Sorrell, said: "We are buying RMBS but we are buying in the secondary market. It is a supply issue."We looked at the AOFM issues but we could not participate when the pricing difference was so large. "The RMBS market has strong fundamentals but secondary market supply is being priced down very aggressively."Sorrell said his other concern was that RMBS was not liquid. "We have to match liquidity with the profile of our funds. We are buyers but we don't want to be left holding securities we cannot sell."Aviva Investors Australia senior manager Rob Camilleri agreed that the secondary market overhang was the big issue.Camilleri said: "The government could take some guidance from what is going on in the United States and direct some of the AOFM investment into the secondary market. We are dealing with a supply issue."Alliance Capital portfolio manager Bruce Potts said one of the constraints on fund managers was clients "who want to know if it is liquid and if it government guaranteed."ANZ head of interest rate research Warren Hogan said he did not expect the "debt bubble unwinding" to be completed before the middle of 2009."We don't really know where the end game is because that won't happen until the US economy stabilises."