Two years after it last held an auction of the residential mortgage-backed securities (RMBS) it had bought after the GFC, the Australian Office of Financial Management (AOFM) has announced it will hold another auction to offload some of its holdings. The AOFM is seeking to sell RMBS issued by a variety of trusts from loans originated by Firstmac, AMP (Progress), Macquarie Bank (PUMA), Bendigo and Adelaide Bank (Torrens) and Wide Bay.
The AOFM acquired the holdings as a result of its programme to maintain liquidity in Australian wholesale credit markets during the GFC and its aftermath. Confidence in western financial markets had been significantly diminished after the collapse of Lehmann Brothers and Bear Stearns. The AOFM began in November 2008 when it bought a total of $1.5 billion worth of securities. It then purchased another $5.8 billion in 2009, $4.7 billion in 2010 and $2.1 billion in 2011.
RMBS are amortising securities. That is, over time the balance owing to the holder is reduced as borrowers pay down their mortgages. These mortgages had been sold by a bank, building society or mortgage provider to a trust which then issued units. It is these units which are referred to as residential mortgage-backed securities.