The spread that two large banks paid over the last two weeks for long-term covered bonds in the domestic debt market may have been generous, if the measures of pricing in the secondary market can be believed.Last week, Westpac sold A$1.7 billion of fixed rate, five-year covered bonds at a spread of 165 basis points over swap to yield 5.75 per cent per annum. The spread to swap on the Westpac covered bond was 10 bps tighter than that achieved by Commonwealth Bank the week before. However, the yield paid by Westpac on its term funding was 22 bps tighter than on the CBA bond, taking into account benchmark interest rates early last week.Westpac also sold $1.4 billion of five-year floating rate notes at a spread of 165 bps over bank bills.Friday's rate sheet from Yieldbroker shows that spreads on the Westpac and CBA covered bonds have contracted to 141.9 bps and 143.1 bps, respectively, and to 154.5 bps and 157 bps for the covered FRNs.Westpac also sourced term funding from offshore markets last week.Offshore, Westpac raised US$400 million on the US s144A market. The two-year FRNs were priced at 125 bps over Libor, which should swap back at approximately 150 bps over bank bills. This suggests that domestic secondary market spreads on two-year FRNs issued by the major banks are very tight.Westpac also raised US$200 million in the same market for one year, at 18 bps over Libor, on Thursday.