Investing report: Why bank funding costs are starting to drop

Bernard Hickey presents the latest Investing Report showing that funding costs for New Zealand and Australian banks on global capital markets have dropped sharply from their pre-crisis peaks. We saw that flow through this week when Westpac sold a guaranteed bond overseas at 60 basis points over the benchmark rate, wheras a similar bond issue a couple of months ago was at 80-85 basis points over the benchmark rate. This, in theory, is reducing some of the foreign funding costs and taking some of the pressure of bank profit margins. We'll see whether that translates into lower mortgage rates. Here's a link to an interactive chart on our site.