The Australian mortgage-backed market appears to be shaping up for a strong first half both domestically and overseas, with the announcement by ANZ Banking Group of the second issue from its Kingfisher Securitisation vehicle, the completion by St. George of a favorably-priced follow-up to its October 1999 debut in the global MBS market and a handful of smaller but equally well-bid transactions by other issuers.

ANZ became the last of the four major banks (the other three are

Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corp) to enter the securitization market last year with the first deal from its Kingfisher structure, which was conservatively sized and priced to ensure a strong response.

The bank appears to be employing a similarly safe strategy with the second deal, Series 2001-1D. The A$500 million floating-rate transaction consists of three sequential tranches. The A$280 million of Class A1 senior notes have a weighted average life of 1.44 years while the A$210 million of Class A2 senior notes have a WAL of 5.27 years. No WAL was given for the A$10 million of subordinated notes.

According to the bank, the notes will be callable at the earlier of seven years from settlement or when the notes represent 10% of the initial invested amount. The senior and subordinated notes are expected to be rated AAA and AA- respectively by Standard & Poor's.

St. George appeared to achieve a pricing breakthrough with its US$938 million transaction through Crusade, announced at the ABS 2001 conference in Phoenix, Arizona. According to lead manager Credit Suisse First Boston, the deal was the best-priced of any by an Australian in the global market to date.

Favorable structure

The structure helped. It included, for example, a US$180 million tranche with a 0.52-year expected average life priced at 2 basis points below Libor, which helped to keep the overall weighted average cost down.

That said, the key US$633.1 million tranche with a 3.34-year EAL priced at 19 basis points over Libor, effectively lower than the 19 basis points paid by National Australia Bank's HomeSide vehicle the previous month on a much shorter EAL of 2.6 years.

The third leg of the deal consisted of A$200 million of domestic

subordinated bonds with an EAL of 7.14 years. This was priced at 40 basis points over the bank bill swap rate compared to the cheapest comparable issue, transacted a year previously, which sold at 42 basis points over an EAL of 6.5 years.

Other mortgage deals

Australian Mortgage Securities, a subsidiary of ABN AMRO, priced a A$500 million domestic deal, bringing the total raised by the company since the beginning of the year to A$1 billion. The ARMS II Fund IX transaction consisted of a A$150 million tranche of senior notes with an EAL of 2.4 years, a A$334.5 million senior tranche with a 4.3 year EAL and A$15.5 million of subordinated paper with an EAL of 6.4 years.

The tranches were priced respectively at 30, 38 and 52 basis points over the one-month bank bill swap rate, giving a weighted average margin over time of 37 basis points.

Bank of Queensland sold A$210 million of senior notes with an assumed life of 3.6 years through its REDS TRust at 35 basis points over one month BBSW, while privately placing A$5 million of subordinated 5.9 year paper.

ABN AMRO led the AMS deal, while Deutsche Bank was responsible for REDS.

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