Australian Government, the Australian Office of Financial Management



Consistent with the objective of maintaining a liquid and efficient market for Commonwealth Government Securities, it is proposed to offer holders of nominated Treasury Bonds the opportunity to convert their holdings into holdings of other nominated Treasury Bonds. These offers will be conducted on a competitive tender basis.

Bond conversion tenders will enable the Australian Office of Financial Management (AOFM) to more actively manage the maturity profile of outstanding bonds. For example, it will be possible to:

  • increase the amount of particular bonds outstanding more quickly than can be achieved in the current low gross issuance environment; and

  • smooth the profile of outstanding bonds in a manner that improves the overall efficiency of the market.

The AOFM intends to conduct the first conversion tender of Treasury Bonds prior to end of the current calendar year. At this stage there are no plans to conduct conversion tenders for Treasury Indexed Bonds. The frequency of conversion tenders will depend on market interest.

The initial focus of conversions is expected to be directed at enhancing the liquidity of key long-dated benchmark Treasury Bonds. This is expected to involve converting bonds with a term to maturity of between 4 and 8 years into bonds with a term to maturity of greater than 8 years.

Bonds acquired by the Commonwealth as a result of conversions are not expected to be reissued in the future.

Conversions will occur on a face value basis (i.e. an equal face value amount of the offered stock will be converted to an equal face value amount of the destination stock). Both the purchase and sale legs of the conversion tender will be settled on a gross basis.

A maximum face value of bonds to be converted will be announced prior to each tender. The Commonwealth reserves the right to convert any amount up to the announced maximum face value of bonds.

Bidding format

The Reserve Bank of Australia will announce a yield for the offered stock at 11:45am on the day of the tender. Given the announced yield for the offered stock, bidders will indicate the yield for the destination stock at which they would be prepared to convert an equal face value of the offered bond to the destination bond. Bids will be able to be submitted between 11:45am and 12:15pm with results announced at 12:45pm.

Acceptance of bids will be made in ascending order of yield bid, i.e. from the lowest yield bid to the highest yield accepted.

Announcement of tenders

Details of conversion tenders will be announced one week prior to the date on which a conversion tender will be held. Announcements will include details of the:

  • offered bond;

  • destination bond;

  • maximum face value amount to be converted;

  • method to be used for allotting stock;

  • date and amount of the first interest payment for the destination bond;

  • closing time for bids; and

  • settlement arrangements.

Terms and conditions

Further issues of Treasury Bonds and Treasury Indexed Bonds will be made under cover of new documentation which details the terms and conditions of issuance for these securities, including the proposed issuance of conversion stock. Copies of these documents can be found on the AOFM website listed below.

Half basis point bidding

Bidding at all tenders for Treasury Bonds and Treasury Indexed Bonds may now be expressed to a maximum of three decimal places (eg 10%, 10.0%, 10.00%, 10.000%). Bids must be whole multiples of 0.005% (eg 10.000%, 10.005%, 11.000%). Bids that are not whole multiples of 0.005 will be disregarded.

Further details regarding Commonwealth bond issuance can be found at

Michael Allen
Chief Executive Officer
(02) 6263 1100

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