How do banks set their fixed rates? There were reports in the media this week of Irish bank bond yields rising due to contagion from Italian political issues. I think this is because the spread of the banks bond yields above the risk-free rate has risen. Could a rise in irish bank bond yields lead to banks hiking their fixed rates? I know the breakage fees can be calculated by reference to cost of funds i.e. inter-bank swap rates as discussed on a bunch of threads on askaboutmoney. I understand that where a bank has a good credit rating the bid-offer spread around interbank rates (euribor) should be small. I'm not sure if this means that pure interbank swap rates are the key driver of fixed rates and irish bank spreads are a red herring. Apologies if this has been discussed in the past. I searched but didn't find anything.