The northern hemisphere summer holiday season, the busiest week of the reporting season in Australia and continuing negative sentiment among investors everywhere, were hardly conducive to corporate bond issuance last week. As a result, activity was fairly quiet with no issuance in the domestic market and only moderate volumes offshore. Westpac was the busiest issuer, raising US$50 million in the US s144A market for one year at Libor plus 30bps and a total of US$475 million by selling certificates of deposit out of its New York office. The CDs were also for one year and yielding Libor plus 30bps. In addition, Westpac priced a three tranche Samurai bond issue on Friday, raising JPY77.1 billion or a little over A$800 million. The JPY25 billion, three year, tranche was priced to yield 88bps over swap while the fixed (JPY15.7 billion) and floating rate (JPY36.4 billion), five year, tranches will yield 106bps over swap/libor. St George Bank raised €30 million for five years with a floating rate coupon of Euribor plus 60bps. The EFRNs were privately placed and unusually, the coupon will be paid annually. ASB Finance, a subsidiary of Commonwealth Bank, raised JPY7.0 billion (approximately NZ$90 million) in the Euromarket for one year, at Libor flat.   In a form of reverse issuance, ANZ exercised its call option on some €300 million of subordinated, lower Tier II, bonds during the week. The bonds were issued five years ago with a ten year final maturity, subject to a 50 bps coupon step-up, if not called after five years. Some investors have raised concerns that in the current environment the banks might be tempted not to redeem such subordinated debt, on the basis that paying the coupon step-up would be cheaper than trying to refinance. However, lower Tier II subordinated debt is penalised by APRA in its final five years with the capital value of the debt reduced by 20 per cent per annum. Holding this subordinated debt becomes expensive for the banks. Moreover, there is reputational risk for the banks as well, if they do not redeem. Investors expect the subordinated debt will be redeemed and in the past it was bought and priced on that basis. Nevertheless, the banks do have the flexibility to choose not to redeem if it suits them.