Expensive sub-debt for CBA

Commonwealth Bank (rated AA-) issued tier two subordinated bonds in the Euromarket late last week, raising €1.25 billion for twelve years with a non-call period of seven years.

The issue was priced at 175 basis points over mid-swaps, which should have swapped back into Australian dollars at around 268 bps over.

This seems very expensive when compared with other domestic tier two issues from the major banks.

CBA was also active in the Uridashi market again last week, raising US$28 million and A$37 million for five years. The bonds will yield 1.63 per cent and 2.56 per cent respectively.