UPDATE 1-ANZ unit latest to tap U.S. short-term market

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SYDNEY, Jan 11 (Reuters) - Australia & New Zealand Banking
Group Ltd (ANZ.AX) has become the third Australian bank in a
week to tap into liquidity in the U.S. short-term market, as
longer-term lenders remain hard to find.

ANZ National International Ltd, a unit of Australia & New
Zealand Banking Group Ltd (ANZ.AX), sold US$1.75 billion of
five-year extendable notes in the 144a private placement
market, said a market source on Friday.

Commonwealth Bank of Australia (CBA.AX) started the trend
with a US$2.5 billion extendable issue led by HSBC. It was
followed by National Australia Bank (NAB.AX) earlier this week
with a US$3 billion issue led by Morgan Stanley.

Australia's fourth major bank, Westpac Institutional Bank
(WBC.AX), is the only one that has not recently sold an
extendable offer.

But Westpac was busy in other markets. It was the first and
only bank to sell bonds in Australia this year. It raised A$1.2
billion ($1 billion) of three-year senior notes at 47 basis
points over swap and BBSW. It also completed a US$1 billion
one-year floating rate notes issue earlier in the week.

Westpac did not say whether it was considering selling an
extendable issue in the near future.

Extendables allow borrowers to tap U.S. money funds, which
with over US$3 trillion of assets represent one of the world's
largest investor segments.

Australian banks have large funding requirements but have
struggled to raise long-term money since credit markets stalled
in August as spooked investors shunned debt issues.

With an average of between A$20 billion and A$30 billion of
funding needed each, they are having to accept debt issues that
are smaller, pricier and less regular.

Extendable notes, a type of debt that has suffered less
from the credit meltdown, are the flavour of the month.

Just this week, U.S.-based Wachovia Bank sold US$5.3
billion, a HBOS unit sold US$5 billion and Deutsche Bank sold
the largest offer: a US$7 billion issue.

The main benefit of extendables for the borrowers is the
significant cost savings, estimated in the multiple basis
points.

Extendables are a form of short-term debt sold for an
initial period, usually 13 months, and can be further rolled
over until final maturity, typically five years. Holders have
an incentive to extend the maturity with a coupon that setps up
annually.

The deal details are as follows:

Issuer: ANZ National International Ltd (London

branch)

Facility: 144a extendable non-callable notes

Amount issued: US$1.75 billion

Initial maturity: Feb. 9, 2009

Final maturity: Feb. 8, 2013

Set date: Jan. 17

First pay: March 10

Coupon: floats, pays and resets annually

YEAR 1: 3-MO LIBOR +22 BPS

YEAR 2: 3-MO LIBOR +24 BPS

YEAR 3: 3-MO LIBOR +26 BPS

YEAR 4: 3-MO LIBOR +28 BPS

YEAR 5: 3-MO LIBOR +29 BPS

Issue price: 100

Lead(s): Goldman Sachs and Morgan Stanley

Issuer rating: AA (S&P), Aa2 (Moody's)
($1=A$1.12)
(Reporting by Cecile Lefort)