Australia: Moody’s May Cut A$83 Billion of Mortgage-Backed Bonds
February 4th, 2008Via: Bloomberg:
Moody’s Investors Service may cut the ratings on A$83 billion ($75 billion) of Australian mortgage- backed bonds linked to PMI Group Inc. on concern the U.S. home- loan insurer will find it harder to pay claims.
Moody’s is reviewing the ratings on bonds tied to loans insured by the local unit of PMI, it said today in a statement. They account for about 45 percent of the A$180 billion mortgage- backed bonds issued in Australia, making for the biggest review Moody’s has done in the nation, said Henry Charpentier, structured finance analyst at the ratings company in Sydney.
Any downgrades will stifle sales of Australian mortgage- backed bonds, which fell 87 percent in the six months to Dec. 31. Australian lenders will find it more costly to raise capital to fund mortgages if Moody’s cuts the ratings.
“There is still a big question mark as to how non-bank originators fund themselves,” said David Goode, a credit analyst at Challenger Financial Services Group Ltd. in Melbourne. “The banks are certainly affected as well; this makes illiquidity worse.”
Australia’s five largest banks increased mortgage interest rates last month to recoup higher borrowing costs, marking the first time in more than a decade that the nation’s biggest lenders made a change in home loan rates that didn’t follow the Reserve Bank of Australia.
Yield margins on Australian mortgage-backed debt have surged as much as fourfold amid the global credit squeeze and no public mortgage-backed bond has been sold this year.
