Foreign bond issuance by the four major banks over the first two weeks of calendar year 2012 was the equivalent of A$8.1 billion. This includes covered bonds and unsecured debt, and public and private placements monitored by The DCM Review.Over the whole of the second half of 2011 Australian banks sold only A$13 billion in international markets, so the new year has opened with a very different tone.The first two weeks of 2012 have also been notable for conspicuous covered bond issuance by the major banks. Commonwealth Bank raised €1.5 billion for five years. Once swapped back into Australian dollars the credit spread paid by CBA was of 220 basis points over bank bills. National Australia Bank followed only days later with a €1.0 billion five-year issue with a similar result.Last week, ANZ sold €1.0 billion of covered bonds with a ten-year term to maturity and achieved a credit spread (once swapped back into Australian dollars) of around 240 basis points over swap. This was a comparatively good result for a ten year debt-raising.The cost of funds to the banks, over benchmark rates, needs to be set in context.Having received authorisation to issue covered bonds only in the last quarter of 2010, ANZ and Westpac were the first to issue covered bonds, issuing five-year bonds into the US s144A market in November, at 115 bps over swap. CBA and NAB this month paid 100 bps over swap for their euro-denominated issues.To compare apples with apples, the issue margins need to be converted back to the Australian dollar cost. ANZ and Westpac achieved 150 bps over swap, and CBA and NAB are paying 220 bps over swap. The difference for CBA and NAB is the basis swap from euros back to US dollars and then a further basis swap from US dollars to Australian dollars.CBA and NAB incurred the cost of two basis swaps, and the euro to US dollar swap is currently at very wide levels, as the euro is being dumped for the (perceived) safety of the US dollar.Nevertheless, CBA and NAB have opened a market - in euros - for their covered bonds that will be useful in the future.On the other hand, ANZ and Westpac have effectively closed the US market for Aussie covered bonds with poorly executed debut issues that have since seen credit spreads widen to 150 bps, incurring losses for investors.Thankfully, the covered bond market in the US is only in its infancy and with the investor groups being different the banks should still be able to issue unsecured bonds. Unsecured issuance is impossible in Europe at the present time, with only covered bonds being accepted by investors.The banks now need to move quickly to issue unsecured bonds in other markets to prevent these latest Euromarket issues from setting a new pricing benchmark. The 220 bps Aussie cost suggests a 270 bps spread for a five-year unsecured bond.Five-year credit default swaps for the major banks are currently at 175 bps, domestic secondary market spreads