Benchmark Spreads for Australian RMBS

Benchmark credit spreads for Austalian Residential Mortgage Backed Securitisations (RMBS) are the average of the issuances spreads (over BBSW 1 month) adjusted by the tranche rating. Ratings of any of the 3 rating agencies are used the benchmark spreads are contraint to increase with ratings and are proportionally constant across time.

As at the benchmark spreads have continued their contraction since peaking in early 2023. This reflects the substantial reduction in uncertainty regarding how the housing borrowers and property prices in response to the significant anticipated increase in interest rates at that time. Contraction reflects the fact that for the most borrowers have adjusted to higher interest rates remarkable well and house prices have remained strong.

Issuances and benchmark spreads

As at .

Degree of subordination

The following chart illustrates the proportion (in AUD million) of each individual RMBS securitisation which is AAA rated by any of the 3 ratings agencies. On average between 90 and 95% of each RMBS issuance's securities are rated AAA, which reflects the generally high quality of RMBS securitisations. Issuances with a higher proportion of non-AAA rated securities generally include higher risk underling mortgages: high Loan to Value Ratios, poor servicability, or borrowers with adverse repayment histories.