Australian banks Australian interest rates

China sag refuels bank funding cost rocket

David Llewellyn-Smith

Thursday, 12 May 2016

Yesterday’s CBA CDS price took off after a few weeks of stability launching 8% to 113bps:

Neither our European nor US bank proxies budged so that delivered a big lift in the Ponzi Index:

The same phenomenon was apparent in the correlation with global high yield which was bid on oil even as Aussie banks weren’t:

The moral of the story? Aussie bank credit quality is directly related to perceptions of Chinese economic health and the iron ore price.

Der!

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.