There has been a marked change in secondary liquidity within the residential mortgage-backed securities market when compared to the last decade, according to a new Realm Investment Manager note. The investment house revived memories of how RMBS changed overnight from a generally accepted and tradeable fixed income product, to an illiquid one. At the same time, many non-bank lending programs effectively hit the wall as the foreign banks exited."The sell-off in RMBS notes bled into other fixed income products, in particular high yield funds, who were not as liquid, and therefore more vulnerable to a run on funds", Realm recalled, before noting a positive mood has returned to this niche sector."This current year is on track to eclipse any in the post crisis period for total issuance, stock is being gazumped here at home and abroad as foreign investors muscle in and swallow whole loan pools," Realm said."In addition, and this goes directly to the question of market liquidity, we have once again seen the re-entry of several participants into market making. Hundreds of millions of dollars' worth of foreign investment bank balance sheets has been earmarked and has been allocated to support the RMBS market."This is on balance a positive for our market, while a good portion of this cash is touristy, absent another tail event a lot of this market making capacity will remain. In our opinion this will have a meaningful permanent impact on the liquidity dynamics of this market."Realm are not RMBS zealots, as it is simply one sector out of many that we manage to meet client objectives. At the time of writing this note RMBS makes up approximately 20 per cent of the Realm High Income Fund's asset base down from an average of around 35 per cent."Anecdotally, [though] we are noticing that issuers are using the strength in this market to clear warehouses of interest only and investor loans. In several pools the interest only component have been approaching 50 per cent of total assets. "Much of this paper will be absorbed by the market, in particular the senior tranches, however, the junior parts of issuance will steepen as big banks crowd out the non-banks in the foreseeable future due to sheer volume."