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Max Bronzwaer |
The tightening spreads seen in Dutch lender Obvion’s recent Storm 2012-I residential mortgage-backed trade is a reflection of growing investor confidence in Dutch RMBS, according to Max Bronzwaer, head of treasury at Obvion.
Securitization is a core part of Obvion’s funding strategy, with the firm rolling out between two and four RMBS trades a year. Last week’s pricing of Storm 2012-I saw the first successive tightening of bonds in the program since the European RMBS market reopened in 2009, Bronzwaer said in an interview Thursday.
Obvion returned to the public market in early 2010 (SI, 3/23/2010), and since then Storm’s public trades have trended toward widening coupons. “The upward trend has been broken,” Bronzwaer told SI. “Ever since the reopening of the market in late 2009-early 2010, if you look at the prints we had it was only going up. Now for the first time, the spread on the A2s has stabilized and the spread on the A1s has decreased.”
Storm 2012-I’s two-year, EUR150 million ($196.7 million) A1 tranche was upsized to EUR245 million ($321.3 million), pricing at three-month EURIBOR plus 110 basis points, 10 bps tighter than the A1 bond in the previous Storm 2011-IV in November (SI, 1/27). The EUR550 million ($721.5 million) A2 bond was upsized to EUR900 million ($1.18 billion) and priced at 155 bps.
“That’s a reflection of the confidence in the product, in Dutch RMBS in general and in Storm in particular,” Bronzwaer explained. “It’s also a sign that the prices on spreads on the A1 on the short-end were somewhat inflated over the last couple of months. There was a focus on shorter-dated paper, which made clear that there is demand.”
Dutch RMBS has remained resilient despite sustained concerns over punitive regulations which risk shrinking the European RMBS investor base, Bronzwaer noted. Under Solvency II, insurance and pension fund investors face a 3.5% capital charge on a 5-year covered bond investment and 35% for a 5-year RMBS. “It’s completely unjustified—there is totally no foundation for such an absurd difference in treatment,” he added. “It is also completely out of line with Basel 3 and CRD IV”.
Yet despite worries among insurance and pension fund investors, Bronzwaer said the firm remains committed to securitization, with plans to tap the RMBS market at least two times, possibly three, this year. “Securitization is at the moment still the main source of our funding, but we have been further diversifying our funding sources and developing alternatives,” he explained.
The firm had mulled a 144A offering of RMBS into the U.S. market to broaden out its investor, but Bronzwaer said no decision has been made to proceed with this strategy. “It’s quite a job to do—it involves a lot of work,” Bronzwaer said. “It’s also expensive, but that’s not the main concern. There are strong possibilities, for sure but it’s fairly complex to do and, at least for the moment, we have enough alternative funding sources.”