Shapiro to the rescue of credit cavaliers

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From Jonathon Shapiro at the AFR:

Friday’s $1 billion sale of mortgage backed bonds by Firstmac is a big deal for more reasons than one. First and foremost it’s the clearest sign yet that the non-banks whose business models rely on access to cheap and abundant wholesale markets, are back as a force, to at least nip at the heels of the big banks. But the deal touches on other facets of our home loan market, financial system and the government’s muddled budgetary mindset.

The bond issue marks the first time a non-bank had hit the billion mark with a bond issue with the main tranche pricing below 1 per cent over the bank rate. The securitisation market is almost back to its glory days of June 2007, when Firstmac raised $1.3 billion from overseas investors.

…So Tuesday’s budget announcement that the government would liquidate the $4.6 billion it holds as part of this programme came as a shock to many in the industry, in particular Firstmac chief financial officer James Austin said the blood “drained from his face” when he heard the announcement, fearing it would derail his deal and stall the recovery of the RMBS market.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.