Banks funding costs are rising sharply, with Westpac launching a hybrid issue that looks like being priced at a margin 70 basis points higher than big bank hybrid issuance just four months ago.

Westpac has launched Westpac Capital Notes 9, seeking A$750 million or more of capital. It will pay a distribution rate of the three-month bank bill swap rate plus a margin expected to be between 340 basis points and 360 bps.

The notes have a first call date of September 2028 and a mandatory conversion date of June 2031.

Earlier this month, NAB launched NAB Capital Notes 6, raising $2 billion at a margin of 315 bps and with a first call date of December 2029.

In March, CBA raised $1.75 billion through the issue of CommBank PERLS XIV Capital Notes, with a margin of 275 bps and have a first call date of June 2029.

In February, ANZ raised $1.3 billion through the issue of Capital Notes 7, with a margin of 270 bps and a first call date of March 2029.

The widening margin comes on top of a steep increase in the 90-day bank bill swap rate, which was below 10 bps at the start of the year and is now around 1.6 per cent.

Westpac’s notes will qualify as additional tier 1 capital. They are perpetual and convertible, and distributions are non-cumulative.

Like the other banks, Westpac has changed the distribution arrangements for the issue to meet the requirements of the new Design and Distribution Obligation.

Applications cannot be made directly to the bank but must be made through a syndicate broker. Retail investors must obtain personal advice from a financial planner.

Westpac is also redeeming Capital Notes 2.