Aussie bank funding – a declining issue

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Some commentators have argued that the RBA will cut their policy rate 25bps to 4% on Tuesday 7 Feb because of the rising cost of bank funding.

This argument had potency when the CBA printed their 5yr covered at +175bps over swap, had some merit when WBC issued their 5yr covered at +165bps over swap … but looks a bit weaker now that both bonds are trading ~140bps over swap (and bid on).

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4 comments

  1. The RBA not only looks at funding costs but also margins.

    It matters not if funding costs rise if margins have not narrowed

  2. Sorry , if bank margins are fine then the RBA won’t worry, if they are then it will give them a pause to think given what they have said about credit growth in the near future.

    1. Agreed. I think it is unlikely that they will tighten on their own – they will ration credit and then ease by less when the RBA responds by cutting.

      Given the way financials are rallying, i think they can afford to wait and see on this question.

      Sent from my iPad

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