By Patricia Kuo Dec. 12 (Bloomberg) -- National Australia Bank Ltd., the country’s biggest by assets, raised A$2.5 billion ($1.7 billion) selling bonds backed by the government, as lenders continue to bolster financial strength. The lender priced A$1.8 billion of five-year, 5.75 percent fixed-rate notes to yield 120 basis points more than the mid-swap rate and A$700 million of floating-rate bonds maturing September 2011 at 100 basis points over the three-month bank bill swap rate, Brandon Phillips, the Melbourne-based bank’s spokesman, said in an e-mail to Bloomberg today. Banks in Australia have sold $9.2 billion of government- guaranteed bonds in yen, dollars and local currency this month to boost balance sheets battered by the global credit slump. The surge in supply of top investment-grade bonds is making investors demand a higher premium above government bonds to hold quasi- sovereign debt such as notes sold by the state of New South Wales. The spread on five-year New South Wales bonds over sovereign debt of similar maturity swelled to 152 basis points today, from an average of 31 basis points in the past 10 years, data compiled by Bloomberg show. A basis point is 0.01 percentage point. National Australia and RBC Capital Markets managed National Australia’s latest debt offering, which has top investment grade ratings from Standard & Poor’s and Moody’s Investors Service. In May, before the government’s guarantee was announced, National Australia raised A$1.1 billion from 8.25 percent five- year bonds that were priced to yield 222 basis points above government debt, Bloomberg data show. To contact the reporter for this story: Patricia Kuo in Hong Kong at pkuo2@bloomberg.net.

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