Apart from the timing of the practical availability of a government guarantee and following virtually no issuance at all in November, the rush of December issuance by the Australian banks may have been driven by another factor - the massive volume of maturities the banks face in 2009.
On The Sheet's estimate, Australian banks have bonds totalling more than $80 billion falling due in 2009. This compares with around $53 billion in 2008.
One factor that has exacerbated the volume of maturities faced this year is that almost a third of the funds raised in international markets last year had a maturity of a little more than a year. Much of this issuance also took place in January and February last year.
In fact, combined domestic and international maturities of more than $30 billion in February and March this year will ensure the rush of issuance by the domestic banks will be sustained. May, August and September will also be big months with maturities of more than $8 billion each.
This is going to pose a funding challenge that the banks have not faced before, with conditions in international credit markets much, much tighter now than they were a year ago, when the GFC was still the credit crunch and debt market conditions were more orderly.
The difficulty for Australian banks, all seeking to tap debt capital markets, is that the world's major banks are pumping out sovereign guaranteed bond issues in an effort to maintain liquid balance sheets.
No doubt the Australian banks will again be very reliant on the domestic market to meet some of their funding needs, but their total requirement goes well beyond the capacity of the domestic market, even at the best of times. The banks will be under more pressure than ever to diversify their sources of funds.
As for the cost of funds, whether in the domestic or international markets, it is unlikely to come down anytime soon and could well move higher yet.
The two charts below show what happened to the banks' cost of debt, in terms of credit spreads over the course of 2008. Five-year funds are now attracting a credit spread of 190 to 200 bps!
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