I keep a regular eye on the major Australian banks wholesale funding costs as guide to how markets are perceiving Australian risk. Since mid last year we have seen a rising trend which pitched sharply upwards as Grexit concerns took centre stage.
But the last week and more has seen those concerns evaporate and we can see the result in the CBA CDS price (a proxy for funding costs) which has dropped 20bps since the January high at 76bps to 56bps yesterday:
The question now is well they keep falling a resume post-Draghi downtrend, especially as European QE gets underway buying bonds that virtually don’t even exist.
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