Compare Credit Cards
- Credit Cards Home
- Balance Transfer Rate
- Low Interest
- No Annual Fee
- Reward Credit Cards
- Business Credit Cards
- Gold & Platinum
- Debit Cards
Compare Banking
Compare Loans
Compare Insurance
- Insurance Home
- Health Insurance
- Home Insurance
- Life Insurance
- Motor & Bike Insurance
- Travel Insurance
Investment Providers
Links
Moody’s Says Outlook For Australian Mortgage Backed Securities Stable
The collateral used to construct Australian residential and commercial mortgage backed securities has a stable outlook according to a credit ratings agency which made its assessment following Australian investment banking major Macquarie pricing a $750 million offer.
Global credit ratings agency Moody’s on Thursday said it would maintain its stable outlook for the performance of collateral used to construct Australian asset backed securities over the next 12 to 18 months.
The ratings agency also said that the surge in house prices would slow down, after data released by the Australian Bureau of Statistics suggested that house prices had spiked a stunning 18.4 per cent for the year ending June.
“We expect that the up-to-now strong appreciation in housing prices will slow down a bit, but undersupply — as well as net migration — will continue to support prices,” said Moody’s senior credit officer Richard Lorenzo.
Mr. Lorenzo added that the trend would more than likely limit actions on rating for RMBS.The uncertainties plaguing commercial real estate have declined over the past year, Moody’s said.
The ratings agencies outlook report came as Macquarie Securitisation today priced a $750m RMBS offer.
Compare Australian Home Loan Deals
CBA Says Bank Funding Costs To Head Higher
New regulations and poor sentiment could well push borrowing costs for banks even higher in the next few months. However according to CBA treasurer Lyn Cobley, the outcome would depend on the results of European bank stress tests.
Ms. Cobley who acts as treasurer for the largest bank in Australia, as measured by market capitalisation holds views that are largely similar to wider sentiments felt by her peers and investors, many of whom also believe that wholesale borrowing costs are likely to head higher to begin with, before receding.
Global investors of late have made demands for higher risk premia in response to the European sovereign default crisis, and almost everyone including Australia’s highest rated lenders have been affected, despite their AA ratings.
CBA says it is well placed to handle volatility in funding costs since it was well ahead of its funding requirements, but added that a heavy fund raising schedule for both governments and corporations expected to take place during the third and fourth quarters would also take its toll on the market Ms. Cobley said.
Ms. Cobley declined to comment on the possibility that higher borrowing costs would mean that lenders would be forced to raise their interest rates outside official moves by the central bank.
The problems affecting the European Union are likely to negatively impact pricing on local bank debt, despite the lack of exposure and solid fundamentals.
“We think there is a possibility spreads will go wider than they are now. Australian banks have been caught up by perceived increased risk in the market generally. Do I think it’s fair pricing? I don’t,” Ms Cobley said.
New global rules on the capital requirements and holding of liquid assets were also another area banks were feeling pressure. Lenders will be required to hold more liquid assets on their balance sheet whilst boosting capital buffers.
“It’s inevitable our liquid assets holdings will get larger and our costs will go up as a result of that,” Ms Cobley said. Australia’s four largest banks have a collective annual funding task of $140 billion, with CBA’s share $40bn to $45bn. About half is sourced from deposits.
Because of a limited domestic investor base, Australia’s banks borrow heavily offshore.
Compare Australian Credit Card Deals
Australian Banks To Begin Issuing US Dollar Denominated Securities
Australian lenders have begun the process of securitising their asset backed debt into US dollar denominated securities, which may have the impact of boosting competition in the market for mortgage lending.
Over the last week Macquarie Group and Members Equity have both begun selling US dollar denominated asset backed securities as they seek to attract European and US investors that are keen to have to exposure to Australian securitisation issues.
Analysts say that the strong reception the two deals received means that more deals are likely to be forthcoming, most likely from smaller non bank finance companies, which in turn could mean a more competitive lending market, given that securitisation is the primary source of funding for non banks.
The two deals are the first time Australian issuers have tapped the US dollar securitisation market since before the collapse of Lehman Brothers in September 2008.
Ilya Serov, an analyst with credit ratings agency Moody’s Investor Service says that international investors were extremely comfortable with Australian credits and if the deals end up being successful, then other issuers were likely to try and replicate them.
Issuers tend not to sell US currency denominated securities unless they are extremely optimistic about international interest, because it tends to cost a lot to issue debt in a foreign currency.
Issuers selling securities in US dollars, must absorb the cost of converting funds raised into domestic currency, which is also known as the cross currency basis swap. This swap rate blew up during the financial crisis and is still currently at about four times the level is has been over the last decade.
The wide swap rate essentially means that any profits would have effectively been erased.
Over the last couple of months many international investors amongst them Aberdeen Asset Management, one of the world’s largest fixed income investors have expressed interest in investing more in Australia.
At the same time, a $16 billion program by the Australian Office of Financial Management to buy RMBS has helped bring spreads in.
Compare Australian Bank Account Deals
Global Financial Market Instability Hits Australian Super Fund Returns
Volatile global financial markets that plunged in the aftermath of the European sovereign default crisis have consumed the highly anticipated bounce in super fund returns.
The drop in financial markets is likely to result in investment earnings falling below double digits for the financial year, ending at about 9.6 per cent.
The recent volatility has seen Australian super funds lose as much as 50 per cent of their valuations which provided the federal government with the impetus to ease rules on capital draw downs from pension funds.
As recently as two months ago, analysts were confidently predicting investment returns as high as 15 per cent. However in the last couple of months valuations have been hammered by renewed fears of the recovery in the global economy, which has produced a string of negative equity market returns in Australia.
The poor performance this year has resulted in lower rolling cumulative returns, with the median five year return now estimated to be 3.7 per cent, according to research firm SuperRatings.
Since the compulsory super was established in 1992, the median balanced fund has returned 6.8 per cent a year, illustrating the fact that a well diversified portfolio does indeed protect investors from catastrophic loss.
Balanced funds have both met and exceeded their long term objectives of outrunning the Consumer Price Index by an annual 3 per cent SuperRatings data shows.
Chant West, another research firm estimates that the median returns for investment funds who hold between 61 to 80 per cent of their portfolio in growth assets is exactly 10 per cent.
Superannuation industry figures look better when taken over the past seven years, but the record has been remarkably volatile.
After a shaky start to the decade, when many Australians fell behind compared to the returns of cash investments in the aftermath of the collapse of the tech bubble, Australians enjoyed a four year period of uninterrupted gains in their super, after which the onset of the first global financial crisis took hold.
Growth funds especially were hit in the financial years 2008 and 2009, posting negative returns of more than 6 per cent and 12 per cent respectively.
Compare Australian Debit Card Deals
Australian Regulators Warn Brokers To Be Suspicious Of Portfolio Manager Window Dressing
The Australian Stock Exchange, which with ASIC acts as a corporate regulator says it intends to monitor portfolio and mutual fund managers closely, as it seeks to stamp out the practice of window dressing.
Window dressing typically occurs at the end of the financial year and is a deliberate strategy managers engage in of price manipulation which dresses up the performance of the portfolio or fund before presenting the performance to clients or unit holders.
>> Read more
Australian House Prices Reasonable Relative To Incomes Says RBA
The Australian central bank is downplaying suggestions that there is a housing bubble in the country, but added that the outlook for countries which are heavily in debt was bleak.
>> Read more
Australian Lenders Likely To Be Unaffected By European Sovereign Default Crisis
The European sovereign default crisis is not expected to hurt the Australian financial system, since the major lenders have very little exposure to euro-zone debt or links to potentially troubled lenders on the continent.
>> Read more
Suncorp Doubles Size Of New RMBS Issue Due To Investor Demand
Banc-assurance group Suncorp-Metway is returning the residential mortgage backed securities market, in a further sign of growing confidence, pricing a $1 billion issue, after investor demand forced the company to double the size the original issue from $500 million.
>> Read more
Westpac To Up The Ante In War For Australian Term Deposits
After a brief respite in the war for depositors, Westpac chief executive Gail Kelly is upping the ante amongst the big four lenders, by saying that Westpac intends to increase its reliance on deposit based funding for the year.
>> Read more
Law Firm Initiates Legal Action Over NAB CDO Exposure
According to a report in The Australian, Maurice Blackburn, the law firm which has initiated the largest ever class action law suit against Australian banks, has opened up a new front in its campaign to obtain damages for claimants.
>> Read more
