Covered bonds may account for one quarter of Westpac's wholesale funding needs over coming years, chief financial officer Phil Coffey told an investor briefing yesterday.Coffey cautioned that market conditions were complex, so the effect on Westpac's margin was uncertain."Covered bonds might make up about a quarter of what we are looking to do over the next few years," he said. "One of the great things about covered bonds is that it has continued to be a market that has functioned at a time when the unsecured lending market has been unsettled by what's going on in Europe."In terms of what... [that] means in terms of margin, obviously covered bonds will be cheaper than unsecured. But what...  unsecured term borrowing... [is coming] in at? It's a difficult one to determine. "It's a bit like credit default swap margin or growth as an indicator of that. It's been in the 70 basis point range in the last two weeks. So, I think we would be brave to try and tell you where that is. "Overall, do we think wholesale funding costs are going to increase? Yes, and, therefore, we have to manage the margin impact of that."Covered bonds, now permitted for the first time in Australia, provide borrowers with greater security by giving them recourse to a specific pool of assets if the issuer defaults.