Australian Central Bank to Buy Mortgage-Backed Debt

Lots of mistrust out there..... And when you talk about as the Ft calls it "Enron-esque characteristics" with off balance sheet vehicles like SIV / conduits in the ABCP market this should be no surprise....

Jede Menge Misstrauen am Markt vorhanden..... Und das sollte auch vorhanden sein wenn man sich die wie die FT es schön ausdrückt "Enron-esque characteristics" der Zweckgemeinschaften ansieht die ausserhalb der Bilanz geführt werden. Fragt hier in Deutschland bei der IKB und in Sachsen nach.

Sept. 6 (Bloomberg) -- Australia's central bank said it will buy debt backed by home loans to add cash to the financial system, after the U.S. subprime credit rout eroded demand for asset-backed securities and drove up interest rates.

> Looks like Bloomberg is overstating it. If you read the official press release Reserve Bank Of Australia DOMESTIC MARKET DEALING ARRANGEMENTS they are not buying RMBS they are taking it as collateral. But nevertheless they have widened the possible funding options....

> Sieht so aus als wenn Bloomberg hier etwas zu dick aufgetragen hat. Wenn man die offizielle Pressemitteilung Reserve Bank Of Australia DOMESTIC MARKET DEALING ARRANGEMENTS als Maßstab nimmt, werden die Papiere nicht direkt erworben sondern wie auch von der Fed & Co lediglich als Sicherheit herangezogen. Bleibt aber trotzdem festzuhalten das die Notenbank die Möglichkeiten der Geldbeschaffung erheblich ausgeweitet hat....

The rate banks charge each other for three-month loans fell 15 basis points from yesterday's 11-year high of 7.06 percent after the Reserve Bank of Australia said in a statement today it will buy top-rated bonds linked to mortgage payments. Asset- backed commercial paper and bank bills are also eligible for purchase.

The move increases funds available to banks and supports the market for asset-backed debt in Australia, where credit markets have been roiled by losses related to debt backed by loans to U.S. homeowners. National Australia Bank Ltd., the nation's largest lender, yesterday said an affiliate had been unable to refinance A$6 billion ($4.9 billion) of loans.

> The FT has this to say Bad pennies roll back to NAB?

NAB’s chief financial officer Michael Ullmer will tell a UBS investment conference in London that the bank expects to see about A$11bn of these assets migrate to its balance sheet by the end of September

And, quoting directly from the Cheery PR Guide to Complex Financial Crises, a spokesman told the newswire:

So whilst this wasn’t a predicted event, it isn’t an event that causes us any concern.

All the assets are rated AA- or higher and the impact on NAB’s core capital ratios will be minimal, the spokesman added.

We aren’t concerned about the credit quality of the assets coming on board because they are subject to our normal credit processes and of course we have done a lot of work to diversify our funding over the years so we are in a strong funding position.

Good pennies, in other words, rather than bad pennies rolling back. Honest (End FT)

Australia's lenders depend more on capital markets for funds than other banks in the Asia-Pacific, Moody's Investors Service said in a report. Australia & New Zealand Banking Group Ltd., the third-largest lender, said Aug. 30 profit margins on its loans have narrowed as much as 25 basis points.

`Helps the Markets'
The Reserve Bank yesterday left the overnight cash rate unchanged at an 11-year high of 6.5 percent. Central banks typically buy government securities in so-called repurchase agreements, or repos, for a set period to bring money market rates closer to their targets. At maturity, the securities and the cash are returned to the central bank.

The spread for three-month Australian dollar Libor over the RBA's benchmark rate touched 56 basis points yesterday, the widest since February 2000. It has averaged 12 basis points in the past five years. A basis point is 0.01 percentage point.

Refinancing Trouble
National Australia Bank moved funding for A$6 billion of loans onto its balance sheet after the unit holding some assets was unable to refinance in the short-term debt market, the Melbourne-based bank told investors in London yesterday.

The rate banks charge each other to borrow in dollar for three months in Singapore rose for a ninth day to 5.7775 percent, the highest since Jan. 3, 2001. A similar benchmark in Hong Kong rose to 4.972 percent, the highest since April 6, 2001.

``The higher cost of funding in the interbank market reflects the banks' reluctance to lend because nobody knows the extent of the subprime problem out there,'' said Joseph Tan, strategist at Fortis Bank SA in Singapore.

The Bank of Japan refrained from adjusting funds in the financial system today. In Japan, the rate for overnight call loans between commercial banks and other financial institutions in Japan rose to 0.49 percent as of 12:13 p.m. in Tokyo from 0.42 percent yesterday, according to brokerage company Tokyo Tanshi Co. That's still below the BOJ's target of 0.5 percent.

Yields on three-month U.S. asset-backed commercial paper rose on Sept. 4 to 6.16 percent, the highest in more than six years, according to data compiled by Bloomberg. In Australia, margins lenders have to pay on the securities have risen up to 20 times the level of a month ago to as much as 40 basis points.

While the Australian dollar Libor rate rose 54 basis points from the end of July until yesterday, the dollar Libor rate climbed 36 basis points to a seven-year high of 5.72 percent

Bloomberg has some details on the impact on the important core capital

Moving loans onto National Australia's balance sheet will reduce core capital by 0.15 percent

Australia & New Zealand Banking Group Ltd., the nation's third-largest bank, has moved A$2.5 billion of loans back onto its balance sheet, and may shift the remaining A$2.1 billion by the end of this fiscal year, spokesman Paul Edwards said today. That will reduce its core capital ratio by as much as 20 basis points