The Australian residential mortgage-backed securities (RMBS) market may be heading for its busiest year since 2008 issuance amid renewed investor interest in the asset class, according to a new report issued by Standard & Poor’s Ratings Services. The report, “Australian RMBS Issuance Has Strengthened, But Is The Revival Sustainable?,” notes that more than A$8 billion of RMBS has been issued in Australia so far this year, but says the sustainability of the market’s recent revival remains sensitive to issues such as global economic and financial market conditions. It also discusses the performance outlook for Australian RMBS in 2013 and the implications of upcoming regulatory changes.
Standard & Poor’s Managing Director Vera Chaplin says: “While we are less pessimistic about global economic and credit conditions than we were in 2012, Australia’s RMBS market isn’t immune to the flow-on effects of some plausible downside global risks, such as contagion from the unresolved eurozone crisis, excessive fiscal tightening in the U.S., and a hard landing for the Chinese economy. Although less likely, rapid deterioration in the Australian economy that drives a rapid increase in unemployment and hurts house prices could adversely impact the performance of RMBS and new issuance conditions.”
Standard & Poor’s expects the strong issuance levels seen in the past few months to continue in 2013, potentially pushing total RMBS issuance volume beyond A$20 billion. At the same time, we expect our ratings on outstanding RMBS to remain stable during the year.
See the full report here.