1. CFO Network
March 2012
Bill Evans.

2. LTRO has improved sentiment at short end...
bps 2yr government bond spread to bunds bps
24000 800
Greece Spain
Portugal Italy
18000 Ireland 600
12000 400
6000 Sources: Bloomberg,
200
Westpac Economics
0 0
Jan-09 Jan-11 Jan-09 Jan-11
2

3. ... less so for longer maturities
bps 10yr government bond spread to bunds bps
4000 800
Greece Spain
Portugal Italy
3000 Ireland 600
2000 400
Sources: Bloomberg,
Westpac Economics
1000 200
0 0
Jan-09 Jan-11 Jan-09 Jan-11
3

4. 2012 monthly required issuance by country
€bn €bn
160 160
Portugal Spain Italy Source: Goldman Sachs
140 France Germany 140
120 120
100 100
80 80
60 60
40 40
20 20
0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
4

5. Net public debt: G7 chalk, Australian cheese
%GDP %GDP
100 100
Sources: Westpac, IMF, Australian Treasury.
90 90
80 1990 2000 80
70 70
60 2009 2015 60
50 50
40 40
30 30
20 20
10 10
0 0
US UK Germany France Canada Australia
5

6. Federal budget: underlying cash balance
% of GDP $bn
4 40
Gov’t MYEFO
fcsts to ’14/15
$bn (rhs) % of GDP (lhs)
2 20
0 0
-2 -20
-3.3
-4 -4.1 -4.2 -40
Sources: Treasury, ABS, Westpac Economics
-6 -60
1980/81 1990/91 2000/01 2010/11
6

7. AU-US 10yr Bond Spread vs AU 10yr Yield
bp %
300 7.0
Source: Bloomberg, Westpac
6.5
250
6.0
200
5.5
150 5.0
4.5
100
4.0
50 AU-US 10yr Bond Spread (lhs) 3.5
AU 10yr Bond Yield (rhs)
0 3.0
May-02 May-04 May-06 May-08 May-10
7

8. CGS Supply & Ownership
A$bn A$bn
250 250
Thousands
Source: RBA, Westpac
200 Total CGS On Issue 200
Resident Holdings
150 Non-Resident Holdings 150
100 100
50 50
0 0
1986 1989 1992 1995 1998 2001 2004 2007 2010
8

9. Public and private debt
ppt ppt of GDP change (2000–2010) ppt
70 70
Household Non-financial corporate Government
60 60
50 Source: BIS
50
40 40
30 30
20 20
10 10
0 0
US Australia
9

10. Household debt
% % of GDP; 2010 %
125 125
Source: BIS
100 100
75 75
50 50
25 25
0 0
US Spain Italy France Germany Australia
10

11. Credit mix: annual growth
% ann % ann
35 35
30 Total Housing Business 30
25 25
20 20
15 15
10 10
5 5
0 0
-5 -5
Sources: RBA, Westpac Economics
-10 -10
Nov-77 Nov-83 Nov-89 Nov-95 Nov-01 Nov-07
11

12. Westpac RMBS Average Trading Margin
bps
160
140
Sources: Westpac
120
100
80
60 Trading Margin
40
20
0
Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11
12

13. RMBS Issuance 2004-2011
$A bn $A bn
70 70
Sources: Westpac, Insto, S&P, Bloomberg
60 60
50 50
Domestic Offshore
40 40
30 30
20 20
10 10
0 0
2004 2005 2006 2007 2008 2009 2010 2011
13

14. CMBS Issuance 2004-2011
$A bn $A bn
5 5
Sources: Westpac, Insto, S&P, Bloomberg
4 4
Domestic Offshore
3 3
2 2
1 1
0 0
2004 2005 2006 2007 2008 2009 2010 2011
14

15. Bank funding composition
%
100
15 11 offshore 13 17
90
80
70 27
39 wholesale - long term
60
wholesale - short term
50
customer deposits
40
30 56
20 46
10 Source: Westpac
0
2008 2011
15

16. 3-5 yr physical bonds widening
bps
250
Big 4 Average Senior Spread
200
150
100 Sources: Bloomberg,Westpac
50
0
Jan-06 Jun-07 Nov-08 Mar-10 Aug-11
16

17. Bank bill vs term deposit rates
% %
10 10
180 day bank bill rate
9 Banks' average 'special' term deposit rate* 9
8 *average across all terms 8
7 7
6 6
5 5
4 4
3 Sources: RBA, Westpac
3
2 2
Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12
17

18. Mortgage rate spread to official cash rate
bps bps
350 350
300 300
+134bps
250 250
200 200
150 150
100 100
50 *spread between average bank standard 50
Sources: RBA, Westpac Economics
variable mortgage rate and official cash rate
0 0
Feb-98 Feb-00 Feb-02 Feb-04 Feb-06 Feb-08 Feb-10 Feb-12
18

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