The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Sunday, March 18, 2012

AOFM starts banking profits on its RMBS investments (@joshgans and my idea)

Phil Bayley of the Debt Capital Markets (DCM) Review reports that the AOFM has started banking profits on its investments in Aussie RMBS, which was an idea that Joshua Gans and I came up with:

AOFM advised the market after the close on Friday, that it had sold A$50 million of fixed rate, bullet maturity RMBS from its RMBS portfolio. This is the first sale of RMBS by AOFM.

AOFM said the sale was made as part of its portfolio management activity and to provide transparent pricing guidance to the market. The emphasis was clearly on the latter, as AOFM advised the five year notes that it had purchased in November 2011 with a spread of 150bps over swap, were sold at a spread of only 132bps over.

However, AOFM did not advise who the issuer of the notes was. But from the information provided it can be deduced that the issuer was IDOL Trust Series 2011-2 and it was the Class A2 notes, of which A$100 million were issued, that were sold. The notes were marked at 155bps over on rate sheets on Friday night.

Clearly, AOFM’s intention is to signal to the market that credit spreads are again contracting for RMBS.

There has been no RMBS issuance since December and the wide pricing of covered bond issues in January, made RMBS issuance uneconomic thereafter. Perhaps AOFM’s action will get the primary market started for 2012.