International Finance Review reported that June marked AIG’s first deal of 2019, reflecting this year’s “sluggish” private-label prime jumbo RMBS issuance; only US6.5bn of bonds have been sold year to date, according to Bank of America Merrill Lynch.
According to Senior Portfolio Manager Jake Remley of Income Research + Management, pricing on those deals is getting tighter relative to jumbo bonds as investors get more comfortable with a corner of the market that burned many of them during the crisis.
“Initially you might have got 25bp-30bp additional spread compensation for deals that were non-QM, compared with jumbo prime collateral,” he said. “Those are now getting done maybe 10bp-20bp wider.
“The market is absorbing this supply with less pricing power than it had in the past. That’s really a function of the fact that the collateral has performed well, the deals have increased credit enhancement and better underwriting (compared with the pre-crisis market).”