Yield premiums on residential mortgage-backed securities have recovered since the credit freeze in 2008 prompted the creation of an RMBS aid program, Swan said in the text of a speech to be delivered tomorrow at the Bloomberg Australia Economic Summit in Sydney. While it doesn’t plan new purchases, the government won’t sell the securities it owns in the near future, he said.
“The Treasury has advised me that it’s now time to stop making new investments,” Swan said. “Investors have a renewed sense of confidence and appetite for the asset class. Pricing is now significantly better than for most of the last five years.”
Offerings of housing-backed notes are booming amid a global credit rally, with Commonwealth Bank of Australia (CBA) and Westpac Banking Corp. (WBC) leading issuers in pricing A$8.21 billion ($8.55 billion) of RMBS last quarter, the most since the three months ending June 2011. Australian home prices are rising as the economy responds to 1.75 percentage points of interest rate cuts in the 14 months through December.
The Australian Office of Financial Management, which administers the RMBS program, has spent A$15.5 billion of its A$20 billion budget, according to information on its website. The program aimed to spur competition in the nation’s home-loan market by helping smaller lenders fund themselves.