The pricing of non-bank issues of residential mortgage-backed securities has tightened since the start of the year, as strong demand for locally issued RMBS and ABS continues. Last week, ColCap raised A$1.4 billion with an issue of RMBS, Triton 2024-1. A short-dated tranche, A1-MM, worth $196 million and with a weighted average life of 0.3 years, was priced at a margin of 90 basis points over the one-month bank bill swap rate. The A1-AU notes, worth $864 million and with a WAL of three years, were priced at a margin of 120 bps; and the A1-AU-G (green) notes, worth $140 million and with a WAL of three years, were also priced at 120 bps. Pricing of the transaction suggests that margins in senior notes have come in by around 10 bps since last year. In November, The A1 notes of Pepper Prime 2023-1 were priced at a margin of 130 basis points over one-month BBSW, and in October the AI notes of a $750 million AFG issue was also priced at a margin of 130 bps. This tightening of margin has occurred despite a high volume of issuance so far this year. Last month, Westpac raised $2.75 billion with an issue, WST 2024-1, that priced the senior notes at a margin of 105 bps. Other lenders that have raised funds in the RMBS and ABS markets this year, or are preparing deals, include Bank of Queensland, ScotPac (a first-time issuer), Athena Home Loans, Mortgage House, IMB, Pepper, Plenti, La Trobe and Firstmac. Challenger Investment Management head of domestic ABS, Stephen Martin, said investors have a “risk-on tone”. Martin said rallying fixed interest markets and a better outlook for borrowers when rates start to come down have driven the tightening of spreads. He said investors expect arrears to go higher but the impact will be specific to different collateral types, rather than a systemic problem. One of the features of the securitisation market in 2023 was the strength of ABS issuance. Martin said he expects to see more ABS in the market this year.