The Australian bank funding cost rocket is, for the time being, out of fuel. Yesterday CBA CDS fell to the lowest level since December at 91.5bps:
The Ponzi Index has fallen back as well, given Australian spreads have contracted more than European and US:
As US high yield debt has continued to be bid while oil recovers:
The much larger contraction in Australian spreads is an interesting phenomenon given it has transpired while the iron ore price has fallen a lot. Australian credit appears to have an on-again, off-again relationship with commodity prices depending upon wider expectations for credit spreads and Chinese growth.
For now, at least, banks have been making debt while the sun shines:
We could see more easing in the spreads yet so long as oil keeps running higher. The big test will come will China explicitly slows in H2. I do not expect the uptrend to break.