Bank funding cost rocket falls to earth

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.