Bond plan a good move
THE federal government’s proposal to allow Australian banks to issue covered bonds will help lessen lenders’ reliance on offshore funding markets, two major ratings agencies say. The Government released draft legislation as part of a suite of proposals to make banks more competitive for mortgages and business loans. Covered bonds would allow for a cheaper source of funding for banks as they generally carry a AA or AAA credit rating, and higher than the typical rating of an issuing bank. The move would partly address a reliance on offshore markets.