Funding costs rising: Westpac

Westpac Banking Corp deputy group treasurer Joanne Dawson has said she expects bank funding costs to remain under pressure for an extended period as a result of the United States' federal reserve's hint that it plans to scale back its stimulus spending, according to The Australian Financial Review.

“We expect the volatility that we have seen over the past six to eight weeks to remain for a period of time as we work through the whole quantitative easing and the aspects of the removal of that quantitative easing,” Ms Dawson told the AFR.

Her comments came in the wake of Westpac's move to raise $750 million from retail investors (see Chris Black's A turning point in the bond market).

Volatility sparked when Federal Reserve chairman Ben Bernanke said last month that the Fed could begin tapering its stimulus spending later this year and shut it down completely by mid-2014 has raised international funding costs for Australian banks.

“We would expect that markets will still remain volatile for some time to come,” Ms Dawson told the AFR.

“That has been a feature of the whole financial crisis – there have been periods of stability and periods of instability.”