The unexpected sell-off of global structured finance assets, including Australian residential mortgage-backed securities, in late September may ultimately have a beneficial impact on the local securitisation market, a big European institutional investor says. Neil Calder, head of credit portfolio management at the European Bank for Reconstruction and Development, said the way Australian RMBS involved in the sell-off was picked up by investors was a demonstration of strong investor support for the asset and its liquidity. The sellers were UK investment managers, including a number operating defined benefit pension schemes. These funds commonly include leverage in their strategies, secured against UK government bonds (Gilts). The UK government’s mini budget in September, which was received badly by the market, caused Gilt yields to rise sharply. The resultant capital losses triggered margin calls on the leveraged funds. Speaking at the Australian Securitisation Forum conference in Sydney yesterday, Calder said about US$15 billion of structured finance assets were sold. About 40 per cent was UK RMBS and a third was US and European collateralised loan obligations. Of the rest, there was about A$1 billion of Australian RMBS. The RMBS was sold via a market auction process called “bids wanted in competition”. The size and frequency of the BWICs in late September was unusual and the key takeaway, Calder said, is how well they traded. “The Australian RMBS was cleared into Australia and Asia. It was a bit of a turning point for us because it showed how much liquidity there was,” he said. “When you have a case study like that showing the depth of liquidity, with the sales going down the capital stack, it makes you re-evaluate the market.” Calder has had a preference for investing in big Australian RMBS issues because they are more likely to be liquid. But after the events of September he is more inclined to look at the notes of smaller issuers. He said that since September, the market has come to see the sell-off as idiosyncratic and not systemic. He said the event also demonstrated the benefit of reforms to credit market rules since the financial crisis. “If this sort of thing had happened during the GFC we would not have had the information to get the pricing right. Now we have that information and investors can bid with confidence.” However, Calder warned that investors would be paying closer attention to the structural integrity of Australian RMBS issues over the coming year as fixed rate loans roll off into higher variable rates. “There might be some sticker shock,” he said.