Citigroup is planning the first sale of Australian residential mortgage bonds by a New-York-based bank since 2008 as relative yields on the notes drop to their lowest levels since global credit markets froze.
According to its 8 April statement, Citigroup’s Australian unit is selling A$760 million (S$1 billion) in securities.
The main class of notes may be priced by the unit of the third-largest US bank, to produce 115 basis points more than the bank bill swap rate.
Australia’s mortgage bond market, which closed in the midst of the sub-prime collapse of 2007, is recovering after the economy expanded for the eighth consecutive quarter through December. Delinquencies were held below one percent, compared with 12 percent in the US.
This year, Australian lenders raised A$5 billion from home-loan debt without state support, while US lenders marketed less than US$550 million of similar bonds since July 2008.
“The market has started to bid quite aggressively as confidence improves,” said David Goodman, the Head of asset-backed research at Westpac Banking Corp in Sydney.
“Residential mortgage-backed bonds continue to perform relatively well, and investors have got cash to put to work.”
Citigroup’s sale is the first in Australia by a US bank since the New York-based lender released mortgage notes in October 2008. The key class of those housing mortgage-backed securities, or RMBS, amounted to A$1.5 billion and yielded 50 basis points more than the bank bill swap rate.