PrefBlog

Interesting piece on Australian covered bonds:

Australia’s covered bond boom is waning less than two years after the market started as yield-hungry buyers more than double purchases of residential mortgage-backed securities.

Issuance of the debt, backed by the borrower and mortgages that stay on its balance sheet, fell 64 percent to $9.9 billion this year, data compiled by Bloomberg show. The decline in Australian offerings outpaced a 41 percent slump from banks worldwide, according to the data.

Renewed appetite for RMBS, as the market recovers after being decimated by the 2008 U.S. subprime collapse, has seen sales surge while banks reserve covered-bond allowances for when market conditions worsen. Commonwealth Bank of Australia (CBA)’s 2017 covered securities offered just 33 basis points more than swaps last month, compared with a 47 basis-point premium on shorter-dated unsecured notes sold by Westpac Banking Corp., Bloomberg-compiled data show. Global financial debt pays a 141 basis-point spread, Bank of America Merrill Lynch data show.

Does this sound familiar?

A one-bedroom, 55-square meter (592-square feet) apartment in Hoegalidsgatan, in the neighborhood where Larsson’s troubled heroine Lisbeth Salander grew up, sold last month for 3.75 million kronor ($569,000), 17 percent above the listing price, after a bidding war involving nine parties.

That level of demand is typical in the Swedish capital, where a shortage of construction, a population boom and mortgage rates below 3 percent have pushed prices in central Stockholm up 35 percent since early 2009. Borrowing for home purchases has in turn fueled record household debt across the country. That’s sparking concern among policymakers over potential damage to the economy and preventing the central bank from cutting rates, even as Sweden’s exporters say action must be taken to weaken the currency to protect thousands of jobs.

Another day, another slaughter for the Canadian preferred share market, with PerpetualPremiums down 48bp, FixedResets off 36bp and DeemedRetractibles losing 49bp. Naturally enough, the Performance Highlights table is again quite lengthy, comprised entirely of losers, dominated by Straight Perpetuals with a scattering of relatively low-reset FixedResets. BAM issues led the decline … their 4.90% Straight Perpetual new issue settles Friday … it won’t be pretty! Volume was extraordinarily high.

This entry was posted on Wednesday, June 12th, 2013 at 1:39 am and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.