Gov guarantee kick-starts funding
(13 January 2009 – Australia) The Australian banks, buoyed by the government guarantee of funding, have got their funding requirements off to a good start this year, with multiple bonds successfully issued.
The strong success of Australian banks to secure funding for their financial year requirements has primarily been a result of the funding guarantee put in place by the Federal Government at the end of 2008.
The wholesale funding guarantee includes short-term funding and term funding for up to 60 months provided to financial institutions, such as ADIs, both within Australia and in overseas markets.
The guarantee effectively offers fund managers risk-free debt priced more cheaply than government bonds. This has led to heightened overseas interest for government backed bonds.
In fact, according to Reuters, over US$25 billion in government-guaranteed bonds has been raised by Australian banks between December 10 last year and January 9.
NAB kicked off the new year with a US$2.5-billion (A$3.5 billion) three year government-guaranteed bond, making it the first international bond issuer from the Asia-Pacific this year.
ANZ group treasurer Rick Moscati said that while the guarantee has opened up an otherwise closed market; it hasn't resulted in any decrease in funding costs.
Although the new asset class carries Australia's AAA credit rating, investors are still looking beyond the sovereign to charge a higher premium, Moscati said.
The wholesale funding guarantee includes short-term funding and term funding for up to 60 months provided to financial institutions, such as ADIs, both within Australia and in overseas markets.
The guarantee effectively offers fund managers risk-free debt priced more cheaply than government bonds. This has led to heightened overseas interest for government backed bonds.
In fact, according to Reuters, over US$25 billion in government-guaranteed bonds has been raised by Australian banks between December 10 last year and January 9.
NAB kicked off the new year with a US$2.5-billion (A$3.5 billion) three year government-guaranteed bond, making it the first international bond issuer from the Asia-Pacific this year.
ANZ group treasurer Rick Moscati said that while the guarantee has opened up an otherwise closed market; it hasn't resulted in any decrease in funding costs.
Although the new asset class carries Australia's AAA credit rating, investors are still looking beyond the sovereign to charge a higher premium, Moscati said.
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