Australian banks Australian interest rates

Australian bank funding cost boosters burn on

Tuesday, 29 September 2015

Yesterday Australian bank funding costs continued their bull run. The CBA CDS price, which is the cost to insure an underlying bond against default and represents a good proxy for the interest rate on that bond, rose another 2.5% to 97.89bps:

And this was before the big Glencore panic last night so we can likely expect a new stage in three figures to begin today.

The reason that this is a problem is that 40% or so of Australian bank funding comes from wholesale markets:

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.