While the covered bond issuance has had little effect on the composition of banks’ funding at this stage, given the large stock of existing funding, it has allowed the major banks to achieve funding at longer tenors than has been the case previously.
Covered bonds have generally been issued for terms of 5 to 10 years, whereas unsecured bank bonds are generally issued with maturities of up to 5 years. Within banks’ deposit funding, there has been a marked shift towards term deposits, which pay higher interest rates than other forms of deposits.