Pepper Money priced a A$750 million issue of residential mortgage-backed securities on Wednesday, its fifth public securitisation for the year, taking total funding from public markets in 2021 to $4 billion.
As expected, margins on some of the notes were a little wider on this deal as the impact of APRA’s direction to ADIs to run down their Committed Liquidity Facility accounts starts to take effect.
Over the past year, RMBS issuers have enjoyed the tightest spreads since the pre-financial crisis period but APRA’s directive is expected to reduce domestic bank investment demand for senior unsecured bank debt and AAA-rated RMBS, both of which could be used as CLF collateral.
The big jump in bond yields over the past couple of months will also have had an impact.
Pepper priced the A1-s notes of its latest transaction, PRS 31, at 60 basis points over the one-month bank bill swap rate, the A1-a notes at a margin of 100 bps, the A2 notes at 120 bps and the B notes at 140 bps.
The notes are supported by a mix of non-conforming and prime mortgages.
When Pepper priced a similar deal in August, the A1 notes were priced at a margin of 80 bps, the A2 notes at 100 bps and the B notes at 140 bps.
The RMBS market and wider ABS market remain active with Resimac, Liberty and Brighte also completing deals in the past few weeks.
Late last month Resimac raised $1.5 billion with a dual currency (US and Australian dollar) RMBS transaction, Bastille Series 2021-2NC. The top Australian dollar tranche, the $472.5 million of A2 notes, were priced at 100 bps over one-month BBSW.
Resimac said 26 investors bought Australian dollar notes and 63 per cent of them were real money investors. Real money investors are not impacted by APRA’s CLF decision.
Liberty Financial raised $700 million when it priced Liberty Series 2021-1 SME Trust in late October. The issue is backed by SME mortgages that have an average loan-to-valuation ratio of 62 per cent.
The A1 notes of the Liberty deal were priced at 100 bps over one-month BBSW and the A2 notes were priced at a margin of 125 bps.
Brighte Capital followed up its debut ABS transaction in October last year, when it issued $190 million of green notes, with a $185 million deal. The notes are supported by loans to households installing solar panels and batteries, plus other home improvements.
Brighte said 85 per cent of the notes were certified green.