National Australia Bank markets the first offering, the second from a major bank to take the lead since Covid-19 attacked Australia in 2020. The bank decides to take this action due to the normalization of the RMBS market and the Term Funding Facility distortions. Actually, four major banks in Australia do not have the urge to issue RMBS or senior bonds. This is because the Reserve Bank of Australia put A$200bn TFF operating between 2020 and 2021.
As a result, all banks (the plus building societies and credit unions) for three years set a fixed rate for as much as 0.25%. This is materially cheaper borrowing levels than the RMBS or senior bond levels. In other words, the majors have taken up 100% of the allowances for a combined A$133bn. This is with the drawdowns concentrated over two periods, reading to the expiry date on September 2020 and June 2021.
National Bank of Australia, on this occasion, has launched guidance for the indicative A$750m prime RMBS offering. This National RMBS Trust of 2022-1 covers senior green tranche. The bank expects that this transaction would lead to some increases in price. The institution’s spread has also widened steadily since the change. This is due to the anticipated upturn in bank supply as well as the diminished bank balance-sheet bit.
The reserve bank as a result surprised with a around 50bp hike in the official cash rate on June 7 to 0.85% during the board meeting. Meanwhile, S&P warned that the interest rates will remain increased in the coming months. S&P argued that Australia’s RMBS market might be challenging out there. This is because the low average loan balances in prime RMBS could inflict more increases. So, transactions could be at risk due to the increase in loan balances.
