After a long build-up, two major Australian banks sold their first covered bond issues last week. Both ANZ, which entered the market on Tuesday night, and Westpac, which followed on Thursday night, chose the US s144A market to make their debuts.CBA and National Australia Bank, which have also taken to the road to show their offerings to offshore investors, may also sell covered bonds this week.There may be some relief at the banks - which have undertaken very little offshore funding since early August - that they can now sell long-term secured debt.ANZ's group treasurer, Rick Moscati, commented in a media release on Wednesday that while covered bonds "won't fully resolve the pressure on our cost of funds, they do provide an opportunity to continue to diversify our investor base."Moscati said that would this "further reduce the requirement for senior unsecured debt in offshore markets [and] also allow us to lengthen our funding profile in a cost-effective manner, particularly for longer five- to 10-year debt." Even so, the two banks have not done themselves any favours with the pricing on these issues. US investors saw them coming and made them pay through the nose.The headline pricing for the two covered bonds was the same, at 115 basis points over US Treasury mid-swaps. ANZ sold US$1.25 billion in bonds and Westpac US$1.0 billion.In the case of ANZ, this is understood to have swapped back to Australian dollars at 150 bps over bank bills. Westpac's swapped-back cost should be similar.The rule of thumb for comparison with unsecured corporate bond spreads is that the credit spread paid on the covered bonds should be half to two-thirds that paid on unsecured bonds. Using a conservative ratio of two-thirds as the measure for comparing covered bonds with orthodox wholesale bank borrowing, this suggests a spread on unsecured bonds for funds raised in offshore markets of 225 bps for ANZ and Westpac.CBA was the last of the major banks to issue five-year bonds in the domestic market. It raised A$2.5 billion in July at a spread of 117 bps over bank bills.Since then, five-year spreads on credit default swaps for the major banks have moved in a wide range. CDS spreads traded as wide as 241 bps, then narrowed to 136 bps, but they are now back at around 190 bps and moving wider again. CDS spreads may well soon exceed the implied unsecured spread obtained from the covered bond issues.On the other hand, secondary market spreads on the major banks' last five-year bond issues are around 145 bps, well inside those of CDS spreads.So why did the ANZ and Westpac pay so much to get their covered bond issues away? Why did the banks clearly flag to investors that they were all coming to the market at the same time, each with initial bond issues of US$1.0 billion plus?The likely answer seems to be desperation.On figures compiled by the DCM Review, the major banks have A$80 billion of bonds issued in international markets maturing in