International bond issuance by Australian borrowers so far in 2010 is well down on the volumes seen at the same time last year. To the end of February 2010, issuance totals the equivalent of just A$22.6 billion compared with A$35.2 billion at the end of February 2009. And with 94.5 per cent of the year-to-date issuance coming from the domestic banks (compared with 95.0 per cent last year), the banks simply aren't facing the funding pressures they were facing then. Admittedly, there was then a lot of pent-up demand from before the government guarantee of bank bond issuance became available.Nevertheless, with bank issuance volumes offshore being so low this year and kangaroo issuance volumes so high (there was no kangaroo issuance until April last year) the current level of the Australian dollar, US dollar, basis swap seems unsustainable. At the end of February 2009, the five-year basis swap was at minus 66 basis points. Of course this was an overreaction to almost three months of no offshore bank issuance from September through November in 2008. Moreover, it was also reflective of the turmoil in global money markets, at the time.However at the end of February this year the basis swap stood at 40 bps - an unprecedented swing of more than 100 bps over the course of one year. And while it eased by around 5 bps last week, it is beginning to look like an over reaction to expected bank issuance that hasn't eventuated.