The Australian mortgage- and asset-backed markets grew by a healthy 13% during 1999, in terms of the value of programs rated by Standard & Poor's Ratings Services. According to the agency, this was A$24.7 billion (US$15.9 billion), compared to around A$22 billion the previous year. Actual issuance of public term deals up to December 10, based on Merrill Lynch & Co. figures, was A$14.2 billion of which slightly more than A$13 billion consisted of MBS.

The growth was less impressive than the exponential increases of the mid-1990s, but perhaps more sustainable. Growth, in any case, is no longer the main story of the Australian market: the theme now is diversification. The year under review offered some interesting examples of asset diversification in the domestic sector and 2000 promises more.

It may be appropriate to note first, however, the consolidation of a trend seen in 1998, when major home loan securitizers, both bank and non-bank, began issuing offshore. They did so because the volumes they required were not available in the local market.

In April, Westpac Banking Corp.'s vehicle, Westpac Securitisation Trust, reprised its hugely successful and innovative global MBS issue of June 1998 with a US$850 million transaction (1999-1G), to which was added a A$33.75 million domestic subordinated tranche.

St George Bank became the second Australian issuer in the global market with its Global Crusade Trust issue worth US$994 million in September (with a A$4 million domestic subordinated tranche). In an acknowledgement of the growing importance of the Euromarkets to Australian MBS issuers, the Global Crusade deal incorporated a tranche specifically targeted at European investors.

Resimac, a mortgage-lending business based in New South Wales and owned partly by the state government, became the first Australian securitizer in the euro-denominated market with a E175 million (US$175 million) transaction. Others to issue in the Euromarkets during the year included ABN Amro's AMS, Macquarie Bank's PUMA Finance and RAMS Mortgage Corp.

The trend among major issuers to finance offshore created a supply shortage in the domestic market and a willingness to experiment on the part of investors. In the mortgage-backed sector, this gave rise in March to what Fitch IBCA described as "the first Australian public issuance of MBS with loans of 100% loan-to-value ratio and the first Australian MBS issue without the benefit of primary mortgage insurance or government support as a credit enhancement."

The deal a A$50 million transaction on behalf of Permanent Custodians securitized mortgages originated by Home Loan Co., a wholly owned subsidiary of housebuilder AV Jennings. Later in the year, Melbourne-based Liberty Finance tested the market's capacity for credit risk further with its Series 1999-1 transaction, the country's first rated securitization of sub-prime debt.

Sanwa Finance Ltd. and ORIX Australia had broken new ground in late 1998 with deals securitizing equipment leases and hire purchase contracts. Their programs (respectively, Symphony Trust and Eden Park Trust) continued to issue during 1999, with ORIX adding finance leases to its third transaction.

St George Bank, shortly before making its successful debut in the global MBS market, became the first Australian bank to securitize auto loans with a A$571 million transaction through its Crusade Auto Trust.

Other notable non-MBS deals included a A$180 million credit linked note issued by Commonwealth Bank of Australia's Medallion Trust, which securitized corporate loan exposures; Citibank's Compass master trust, which used an innovative structure to securitize revolving credit home equity loans; and a A$230 million credit card transaction for retailer David Jones.

Arguably the most important new asset class to appear during the year important in the sense of promising to add most to the market's long-term development was commercial mortgages. The Leda Property Group securitized two shopping centers in a A$215.2 million transaction; transport-to-healthcare group Mayne Nickless

sold A$92 million of bonds securitizing cashflows from

a private hospital; and international healthcare

financier Omega parceled the lease payments from

the operator of nursing homes owned by an Omega


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