In an interesting development, Australian bank funding costs are trending higher. CBA CDS prices hit their highest mark since January yesterday, the trend is firmly upwards and looks set to break to new highs:
There is nothing alarming here but it is interesting to speculate on the drivers and implications. The cause is pretty easy to identify because it happening universally. I’ve used CBA as an Australian bank proxy but using comparable mortgage banks like Wells Fargo as a US proxy or Credit Agricole as a European proxy shows exactly the same pattern. Bank funding costs globally are trending up from their 2014 nadir.
Australian banks do not, at this stage, look any better or worse than their international peers, though local bank CDS prices are higher here than the US now, which was not the case previously, and are tracking closer to Europe, which makes sense given they’re big borrowers so should be priced against the marginal buyer.
