Mortgage Backed Securities make a comeback
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The security is a single prime office building in Queen Anne’s Gate, Westminster, tenanted by the Government. It will be a straightforward fixed rate bond with none of the slicing and dicing which was normal prior to the credit crunch.
Apart from confirming it was marketing the bonds Land Securities refused further comment and so, assuming the issue succeeds, a key piece of information to wait for will be the yield at which the bonds are sold.
This follows a similar £430m issue by Tesco last month and one thing both issues have in common is that they were both from very highly rated companies offering absolutely prime assets as security.
Whilst one must be careful not to read across too much from these issues to the residential mortgage backed securities market it is nevertheless very encouraging to see the market for new mortgage backed securities beginning to open up, albeit on a very limited basis. But you have to start somewhere.
There are plenty of potential lenders keen to issue RMBS and banks active in the market such as JP Morgan keen to test the water with investors.
As far as I am aware the last issue of RMBS was by HBOS a little over a year ago.
This was designed to test the market but HBOS had to concede a yield of around 9.5% to get the issue away.
But the investors will have done very well out of it and assuming the Land Securities issue is successful the day issuing RMBS again become a viable proposition is looking a little closer.
