The Future for Investing in Mortgage-Backed Securities 2008

Table of Contents

• DATAMONITOR VIEW
  • CATALYST
  • SUMMARY
• ANALYSIS
  • The US, Europe and Asia have embraced RMBS; as a result, at least $6.6 trillion in RMBS sit on balance sheets around the world
    • The US issued $1.934 billion in MBS securities in 2006, making it the largest single country issuer in the world
      • Balance sheets worldwide have $5.8 trillion in exposure to US RMBS
    • Europe has seen a dramatic increase in securitized asset issuance in the past four years
      • The UK is Europe' s largest issuer of RMBS, with strong growth in issuance in the last four years
      • The European MBS market is only 20% the size of the US MBS market
    • MBS coming from Australia are relatively healthy for a number of structural reasons
  • The problem is that nobody knows who holds the defaulting securities, or where their valuations may end up
  • In the short-term, there will be a lot of upheaval
    • The value of MBS reported in the balance sheets of 38 of the world' s largest banks exceeded $1 trillion at the end of 2006
      • Asia Pacific banks will likely fare better than their peers in other parts of the world
      • US banks are facing a difficult year in 2008
      • At least $300 billion in MBS sat on European balance sheets as of December 2006
  • The worst is not over, but as a medium-term investment, the RMBS market is still an attractive one
  • MBS are a good investment for the right wealth management clients
• APPENDIX
  • Definitions
    • Agency/GSE MBS
    • Collateralized debt obligations (CDOs)
    • CMBS
    • Fannie Mae (FNMA)
    • Freddie Mac (FHLMC)
    • Ginnie Mae (GNMA)
      • Mortgage-backed securities (MBS)
    • Private label MBS
    • RMBS
    • Securitization
    • Sub-prime
  • Methodology
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
  • List of Tables
    • Table 1: MBS issued in the US each year, ($bn)
    • Table 2: US Agency MBS outstanding, 1995-March 2007, ($bn)
    • Table 3: MBS issuance based on originating country or region (Europe), 1999-2006, ($bn)
    • Table 4: UK major banks' issuance of RMBS, (£bn)
    • Table 5: MBS issuance based on originating country or region (Australia), 1999-2006, ($bn)
    • Table 6: APAC-based bank MBS exposure accounted for 282% of the same companies' total profits in 2006
    • Table 7: North America-based bank MBS exposure accounted for 501% of the same companies' total profits in 2006
    • Table 8: Western Europe-based bank MBS exposure accounted for 344% of the same companies' total profits in 2006
  • List of Figures
    • Figure 1: US MBS issuance has been relatively steady over the last three years following a three-year boom in issuance
    • Figure 2: Agency MBS outstanding balances have grown strongly in the US from 1995 to March 2007
    • Figure 3: European securitization has grown dramatically since 2003
    • Figure 4: The UK market for RMBS has grown substantially in recent years, 1999-2006
    • Figure 5: Australia' s MBS issuance is much smaller than that of Europe or the US, but has grown strongly since 2000