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CBA and NAB seek term-funding

11 October 2011 5:21PM
The comparative lull in bank funding in the term-debt market may be drawing to a close, with Commonwealth Bank and National Australia Bank each yesterday marketing term debt and structured issues respectively.CBA is marketing a January 2015 fixed-rate bond at an indicative spread of 115 basis points over the 90-day swap. (AFR Dealbook and Insto both reported the pricing yesterday).This may be five to 10 basis points outside the notional pricing of three-year bank debt in the secondary market. Thus, while the cost of debt for major banks is rising, the actual costs are nothing like those implied in the often-quoted benchmarks for credit default swaps, at least in the domestic market. The proposed CBA bond also helps put in context the much-repeated claims by top bank management that they are funded "six months ahead", an observation that could hardly justify an extended holiday from wholesale debt markets or the refinancing risks such an approach would entail.Meanwhile, National Australia Bank began marketing a £829m securitisation for its Clydesdale Bank subsidiary, through the Lannraig Master Trust, last night. All the loans in the new trust are investment loans (known as buy-to-let in the UK).Previously, Clydesdale securitised some of these loans in 2007 but bought back the loans later in order to make the earlier RMBS conform to norms for the UK securitisation market, Total Securitisation news service reported in July.Two weeks ago, Moody's Investors Service cut the long term bank deposit and senior debt rating of Clydesdale Bank to A2 from A1. It's not clear what impact this may have on the Lannraig Trust. Moody's rated the senior tranche, with a value of £670 million, at Aaa.NAB raised A$1.5 billion, via a residential mortgage-backed bond issue, three weeks ago. NAB paid 120 bps over bank bills for the money, which was raised through the senior tranche of the issue. And, last week, Westpac sold $1.6 billion, via RMBS, at a spread of 125 bps.

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