RBA spells out the lowdown on easy credit
Average rates on business loans "are at an historic low" the Reserve Bank of Australia emphasised in its quarterly Statement on Monetary Policy on Friday.In a survey of the costs of borrowing for banks and business, the RBA observed that "major banks' average funding costs have declined slightly since the previous statement [three months ago].""Conditions for issuers in long-term wholesale debt markets have continued to improve, with the cost of new issuance remaining at low levels. At the same time, wholesale debt issued previously at higher spreads has continued to mature, reducing the cost of outstanding debt.However, the RBA said, to date, this had " only had a modest effect on banks' average funding costs" as long-term wholesale debt currently represented about 12 per cent of banks' total funding.Term deposit rates have also eased in line with "the favourable conditions in wholesale markets… In addition, the spread between term deposit rates and wholesale market rates has narrowed over the past year."The skinnier spreads on mortgage-backed bonds also attracted comment."Primary market issuance spreads for banks and mortgage originators on senior RMBS tranches tightened further to their lowest levels since 2007," the RBA said.