Bank funding cost rocket burns on

The CBA CDS price was up again yesterday to 119bps as concerns about bad loans in Australia and abroad mount. These are no longer theoretical as Arrium presents a possible large blow to banks, ANZ has already announced rising commodity-related provisions and we are seeing dumb bubble mortgage arrears rise rather suddenly and steeply (albeit from a low base), as well as ABS weakness:

Add in the context of a global commodities bust and debt contagion, as well as regulator’s butt-covering drive to raise capital locally and it’s no wonder bank credit quality is in question.

Wells Fargo and Credit Agricole also saw spreads widen:

But not as much as CBA so the Ponzi Index rose again:

The chronic credit crunch rolls on.

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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.