Challenger Mortgage Management has been surprised by the strength of demand for its latest RMBS issue, Challenger Millenium Series 2008-2 Trust. The deal was priced yesterday and upsized from $750 million announced when the deal was launched late in November to $824 million.The AAA tranche was priced at 135 basis points over bills. Challenger won a mandate from the Australian Office of Financial Management under the Australian government's $8 billion program to support the RMBS market.The AOFM invested $500 million in the deal, leaving $324 million to be taken up by external investors.That is the best result for an AOFM-mandated deal so far. AOFM invested $496 million in FirstMac Mortgage Funding Trust Series 2-2008 and $500 million in Members Equity Bank's SMHL Securitisation Fund 2008-2.In FirstMac's case, the group had set out to raise a further $200 million from external investors but ended with $100 million being placed with seven domestic investors. Members Equity also raised an additional $100 million from external investors.Challenger chief operating officer Brian Benari said seven investors had bought notes, including some overseas investors. Challenger did not buy any notes.Benari said the government support program was working. "The AOFM involvement is a demonstration of strength that has attracted the interest of external investors."Joint lead arrangers for the Challenger deal were RBS, Commonwealth Bank and Macquarie Group.The pool of prime residential mortgages has a loan seasoning of 27.8 months, which Standard & Poor's said was high in comparison with other pools.Before the pool was upsized it had 3160 loans with an average value of $237,291. The weighted average loan to valuation ratio was 66.8 per cent.The fourth issuer to win an AOFM mandate is Resimac, which has launched a $600 million deal, Resimac Premier Series 2008-1.