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).


  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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